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Gdp Growth Incentives And Earnings Management: Evidence From China, Xia Chen, Qiang Cheng, Ying Hao, Qiang Liu
Gdp Growth Incentives And Earnings Management: Evidence From China, Xia Chen, Qiang Cheng, Ying Hao, Qiang Liu
Research Collection School Of Accountancy
Using data from China, we examine whether and how the incentive to boost GDP growth at the government level affects earnings management at the firm level. We find that firms in provinces with GDP growth lower than the national level or the average of the adjacent provinces are more likely to engage in earnings management than firms in other provinces. Specifically, they are more likely to inflate revenues, overproduce, and delay asset impairment losses. The aggregate earnings management induced by GDP growth incentives accounts for about 0.5% of GDP. The results are stronger for local state-owned enterprises, in provinces with …
Ceo Overconfidence And Management Forecasting, Paul Hribar, Holly I. Yang
Ceo Overconfidence And Management Forecasting, Paul Hribar, Holly I. Yang
Research Collection School Of Accountancy
This paper examines how overconfidence affects the properties of management forecasts. Using both the ‘over‐optimism’ and ‘miscalibration’ effects of overconfidence to generate our predictions, we examine three research questions. First, we examine whether overconfidence increases the likelihood of issuing a forecast. Second, we examine whether overconfidence increases the amount of optimism in management forecasts. Third, we examine whether overconfidence increases the specificity and precision of the forecast. We use both options‐ and press‐based measures to proxy for individual overconfidence, and find support for all three research questions. We further find that the results are concentrated among firms that provide forecasts …
Does Increased Board Independence Reduce Earnings Management? Evidence From Recent Regulatory Reforms, Qiang Cheng, Xia Chen, Xin Wang
Does Increased Board Independence Reduce Earnings Management? Evidence From Recent Regulatory Reforms, Qiang Cheng, Xia Chen, Xin Wang
Research Collection School Of Accountancy
In this paper, we examine whether recent regulatory reforms requiring majority board independence are effective in reducing earnings management. Firms that did not have a majority of independent directors prior to the reforms (referred to as non-compliance firms) are required to increase their board independence. We find that overall, compared to the other firms, noncompliance firms do not experience a significant decrease in the extent of earnings management from prior to the reforms to afterwards. However, we find that non-compliance firms with low information acquisition cost experience a significant reduction in earnings management compared with the other firms. The results …
Does Increased Board Independence Reduce Earnings Management? Evidence From The Recent Regulatory Reform, Xia Chen, Qiang Cheng, Xin Wang
Does Increased Board Independence Reduce Earnings Management? Evidence From The Recent Regulatory Reform, Xia Chen, Qiang Cheng, Xin Wang
Research Collection School Of Accountancy
We examine whether recent regulatory reforms requiring majority board independence reduce the extent of earnings management. Firms that did not have a majority of independent directors before the reforms (referred to as noncompliant firms) are required to increase their board independence. We find that, while noncompliant firms on average do not experience a significant decrease in earnings management after the reforms compared to other firms, noncompliant firms with low information acquisition cost experience a significant reduction in earnings management. The results are similar when we examine audit committee independence and when we use alternative proxies for information acquisition cost and …
Do Managers Use Meeting Analyst Forecasts To Signal Private Information? Evidence From Patent Citations, Katherine Gunny, Tracey Chunqi Zhang
Do Managers Use Meeting Analyst Forecasts To Signal Private Information? Evidence From Patent Citations, Katherine Gunny, Tracey Chunqi Zhang
Research Collection School Of Accountancy
This study examines whether firms manage earnings to meet analyst forecasts to signal superior future performance. Prior research finds that firms use earnings management to just meet analyst forecasts and that these firms have a positive association with future performance (Bartov et al., 2002). There are two potential explanations for the positive association – signaling and attaining benefits that allow for better future performance (i.e., the real benefits explanation). Prior studies cannot provide evidence of signaling because they do not control for the real benefits explanation. Our research design enables us to control for the real benefits explanation because we …
Executive Equity Compensation And Earnings Management: A Quantile Regression Approach, Chih-Ying Chen, Ming-Yuan Li
Executive Equity Compensation And Earnings Management: A Quantile Regression Approach, Chih-Ying Chen, Ming-Yuan Li
Research Collection School Of Accountancy
Prior research has investigated the association between executive equity compensation and earnings management but the evidence is not conclusive. We investigate this question using the quantile regression approach which allows the coefficient on the independent variable (equity compensation) to shift across the distribution of the dependent variable (earnings management). Based on a sample of 18,203 U.S. non-financial firm-year observations from 1995 to 2008, we find that chief executive officer (CEO) equity compensation is positively associated with the absolute value of discretionary accruals at all quantiles of absolute discretionary accruals, but the association becomes weaker as the quantile decreases. The association …
Do Abnormally High Audit Fees Impair Audit Quality?, Jong-Hag Choi, Jeong-Bon Kim, Yoonseok Zang
Do Abnormally High Audit Fees Impair Audit Quality?, Jong-Hag Choi, Jeong-Bon Kim, Yoonseok Zang
Research Collection School Of Accountancy
This study examines whether and how audit quality proxied by the magnitude of absolute discretionary accruals is associated with abnormal audit fees, that is, the difference between actual audit fee and the expected, normal level of audit fee. The results of various regressions reveal that the association between the two is asymmetric, depending on the sign of the abnormal audit fee. For observations with negative abnormal audit fees, there is no significant association between audit quality and abnormal audit fee. In contrast, abnormal audit fees are negatively associated with audit quality for observations with positive abnormal audit fees. Our findings …
Auditor Reputation And Earnings Management: International Evidence From The Banking Industry, Kanagaretnam Kiridaran, Chee Yeow Lim, Gerald J. Lobo
Auditor Reputation And Earnings Management: International Evidence From The Banking Industry, Kanagaretnam Kiridaran, Chee Yeow Lim, Gerald J. Lobo
Research Collection School Of Accountancy
We examine the relation between auditor reputation and earnings management in banks using a sample of banks from 29 countries. In particular, we examine the implications of two aspects of auditor reputation, auditor type and auditor industry specialization, for earnings management in banks. We find that both auditor type and auditor industry specialization moderate benchmark-beating (loss-avoidance and just-meeting-or-beating prior year’s earnings) behavior in banks. In addition, we find that once auditor type and auditor industry specialization are included in the same tests, only auditor industry specialization has a significant impact on constraining benchmark-beating behavior. In separate tests related to income-increasing …
The Association Between Audit Quality And Abnormal Audit Fees, Jong-Hag Choi, Jeong-Bon Kim, Yoonseok Zang
The Association Between Audit Quality And Abnormal Audit Fees, Jong-Hag Choi, Jeong-Bon Kim, Yoonseok Zang
Research Collection School Of Accountancy
Using a sample of 9,820 firm-year observations over the 2000-2003 period, this paper examines whether, and how, audit quality proxied by unsigned discretionary accruals is associated with abnormal audit fees, i.e., actual audit fees in excess of expected, normal audit fees. The results of various regressions reveal that the association between the two is insignificant for the full sample, significantly positive for the subsample of clients with positive abnormal fees, and insignificantly negative for the subsample of clients with negative abnormal fees. The above results suggest that auditors’ incentives to compromise audit quality differ systematically for more profitable clients (with …