مقاله انگلیسی رایگان در مورد متحرک سازی درآمد و دستکاری درآمد – اسپرینگر 2017

Abstract

This study develops a theory that predicts the lower the degree to which firms’ earnings are correlated with the industry the greater the probability a firm will issue a biased signal of firm performance. The theory provides for causal predictions in our empirical tests in which we examine the probability a firm will be subject to an Accounting and Auditing Enforcement Release (AAER). The empirical findings provide support for the theory, even after controlling for various predictive variables from the literature, indicating the degree of earnings co-movements with the industry is in fact a causal factor in managers decisions to bias earnings reports. We further illustrate that low co-movement firms are less conservative than high co-movement firms, which provides an application of our theory to a broader setting. Overall, we provide both a theory and an empirical validation of the theory helping to discipline the thinking about earnings management and allowing for causal relations to be uncovered.

Introduction

The notion that corporate stewards bias their earnings reports to influence market beliefs is well accepted in the literature (See Dechow et al. 2010 for a review of the literature on earnings quality and earnings management). A recent stream of literature develops dynamic structural models to derive causal inferences regarding the drivers of earnings management and to guide empirical research in detecting and calibrating the extent of earnings management (i.e., Gerakos and Kovrijnykh 2013, Beyer et al. 2014, Zakolyukina 2014). We contribute to this line of research by investigating a potentially important determinant of earnings management – the degree to which a firm’s earnings co-move with the industry, which in turn influences the ability of the market to unravel bias in reported earnings. In this respect, Fischer and Verrecchia (2000) and Heinle and Verrecchia (2016) provide theoretical insight by showing that a manager’s ability to bias a report is a function of how much the market is able to infer about a firm from the reports made by other firms. In this paper, we build on these models to theoretically derive reporting bias as a function of the co-movement of a firm’s earnings with aggregate industry earnings, which then provides us with a basis to formulate and test hypotheses with respect to assessing a manager’s ability to bias an earnings signal.