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Author: 楊宜華
Publisher:
ISBN:
Category :
Languages : en
Pages : 92
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Author: 楊宜華
Publisher:
ISBN:
Category :
Languages : en
Pages : 92
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Author: John Jacob
Publisher:
ISBN:
Category :
Languages : en
Pages : 69
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Quarterly earnings allow aggregation into annual earnings in four different ways. Fiscal year reported earnings is one of these four possible measures of annual earnings, the others being earnings for years ending at the first, second and third fiscal quarters. We provide evidence on earnings management in fiscal year earnings relative to these three alternative measures of firms' annual earnings. We confirm prior findings in Burgstahler and Dichev (1997) of discontinuities around zero and around prior year earnings in histograms of fiscal year earnings. Subsequent research questions whether these discontinuities are evidence of earnings management or whether they are attributable to biases induced by taxes, scaling and sample selection. Using the histograms of our alternative annual earnings measures, we offer additional evidence in this debate. We also find evidence of earnings management in broader intervals around thresholds. We believe that our research design is better suited to test for earnings management in these broader intervals than those used in prior studies. We also compare the statistical properties of fiscal year earnings to annual earnings starting with the fiscal year quarters two, three and four. We find that the variance and kurtosis of earnings are higher for fiscal year earnings while skewness of earnings is lower at the fiscal year. These results are more consistent with earnings management than with the effects induced by 'settling up' in fourth quarter earnings. Overall, this study contributes to the literature on the prevalence, effects of and factors associated with earnings management.
Author: Sarah E. McVay
Publisher:
ISBN:
Category :
Languages : en
Pages : 55
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This paper examines the classification of items within the income statement as an earnings management tool. Evidence is consistent with managers opportunistically shifting expenses from core expenses (cost of goods sold and selling, general, and administrative expenses) to special items. This vertical movement of expenses does not change bottom-line earnings, but overstates core earnings. In addition, it appears that managers use this earnings management tool to meet the analyst forecast earnings benchmark, as special items tend to be excluded from both pro forma and analyst earnings definitions.
Author: Keji Chen
Publisher:
ISBN:
Category : Valuation
Languages : en
Pages :
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Abstract: Accounting valuation models have been widely studied by researchers and commonly used by practitioners. Almost all the accounting valuation models require earnings as one of the inputs (or the only input). However, one question has not been addressed: whether earnings of a longer interval or earnings of a shorter interval should be used in the valuation models. The fact that earnings can be aggregated over time and this intertemporal aggregated earnings contains fewer measurement errors is intrinsic to accounting. Although earnings aggregation is intrinsic to accounting, it has received little attention by researchers when using accounting valuation models to estimate variables of interest. Also, although there are few studies that examine the effect of earnings aggregation, these studies focus mainly on the contemporaneous explanatory power of earnings for returns. Therefore, the effect of earnings aggregation on inferring prices via accounting valuation models remains unclear, and simply aggregating earnings over a longer interval may potentially improve the estimates from the valuation models. Despite the fact that the results for the cross-sectional sample may not be encouraging, the results for the sub-samples support the expectation that earnings aggregation improves the ability of the valuation model to infer prices for some types of firms. For firms with negative earnings and for small firms, using aggregated earnings of a longer interval in the valuation model generally generates smaller errors in inferring prices than using annual earnings, and the differences between the errors can be significant. These results contribute to the understanding of the fundamental accounting attribute of earnings aggregation. More specifically, this study contributes to the valuation research insofar as the results show that it is beneficial to aggregate earnings over a longer interval when applying accounting valuation models for some specific types of firms.
Author: 高祖祥
Publisher:
ISBN:
Category :
Languages : en
Pages : 63
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Author: Ahmed Abdalla
Publisher:
ISBN:
Category :
Languages : en
Pages : 58
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We examine the information content of earnings components conditional on the existence of misclassification of earnings in the income statement. We develop a vector autoregression (VAR) of a set of accounting variables that accommodates, besides other variables, two components of transitory earnings; a core component reflecting shifted core earnings and a transitory component reflecting purified transitory earnings. Our model analysis derives two properties of shifted core earnings. Shifted core earnings forecast future abnormal earnings similar to reported core earnings, and shifted core earnings provide a "bad news" signal of management incompetence. Using special items as measure of a transitory line item that is potentially contaminated by shifted earnings, we provide empirical evidence in support of the former. We propose and find empirically that purified special items are transitory. Nevertheless, our evidence suggests that stock prices do not fully reflect the heterogeneity between the core and transitory components of special items, but rather overstate the entire amount of special items when shifting is suspected.
Author: Elio Alfonso
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ISBN:
Category :
Languages : en
Pages :
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This study examines whether the market misprices core earnings (operating income before depreciation and special items) when firms use income classification shifting tactics to boost their core earnings. Previous large sample U.S. studies relate shifted core earnings estimates with future returns and find weak associations. We classify our samples as classification shifters or non-shifters based on various estimation methods and provide strong large sample evidence that the market overprices the core earnings provided by the classification shifters in a nontrivial fashion. While classification shifting tactics do not affect total accruals, we find evidence that the extent of accruals mispricing is stronger for the classification shifters. Our findings are timely given the Security and Exchange Commission's recent concerns of firms' income classification shifting behavior.
Author: Ray Ball
Publisher:
ISBN:
Category :
Languages : en
Pages : 53
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Book Description
The accounting literature has traditionally focused on firm-level studies to examine the capital market implications of earnings and other accounting variables. We first develop the arguments for studying capital market implications at the aggregate level as well. A central issue is that diversification makes equity investors at least partially and potentially almost completely immune to several firm-level properties of earnings by holding diversified portfolios. Diversification is particularly important when assessing the welfare consequences of random errors in accounting measurement (imperfect accruals) and, to the extent it is independent across firms, of deliberate manipulation (earnings management). Consequently, some firm-level metrics of association, timeliness, value relevance, conservatism and other earnings properties do not map easily into investor welfare. Similarly, earnings-related risk manifests itself to equity investors largely through systematic earnings risk (covariation with aggregate earnings and/or other macroeconomic indicators). We conclude that the design and evaluation of financial reporting must adopt at least in part an aggregate perspective. We then summarize the literature in accounting, economics and finance on aggregate earnings and stock prices. Our review highlights the importance of studying earnings at the aggregate level.
Author: Alaa Zalata
Publisher:
ISBN:
Category : Accounting
Languages : en
Pages : 0
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This thesis also examines whether external auditors and corporate governance are able to mitigate classification shifting practices. The results show that high quality auditors are less likely to question the proper classification of recurring items. However, high quality internal governance in terms of board and audit committee are more likely to challenge management accounting practices, especially, the disclosure of exceptional items. These inferences are robust to a number of modelling specifications and variable definitions. The results collectively demonstrate that IFRS provides management with greater opportunity to misclassify some recurring items, and while external auditors do not mitigate such practices, strong internal governance do.
Author: Kenton K. Yee
Publisher:
ISBN:
Category :
Languages : en
Pages : 47
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Book Description
The concept of residual income has become popular in recent years due, in part, to the Ohlson 1995 article on residual income valuation. Since Ohlson assumed clean surplus accounting in that article, the concept of residual income and clean surplus accounting have become intimately linked in the literature. But is clean surplus accounting necessary for residual income valuation? Is there a formulation of residual income valuation that holds even when accounting violates the clean surplus relation? Yes. This article shows that accounting-based valuation builds naturally from a set of accounting-based quot;primitive differencequot; variables, not from the clean surplus relation. The primitive difference variables extend the notion of residual income. Using the primitive difference variables, this article specifies how value functions may be nonlinear in earnings and book value in settings with limited liability, accounting conservatism, or real options and still be dividend irrelevant.
