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Earnings Management Constraints: An Examination Of The Tradeoff Between Accruals-Based Earnings Management And Classification Shifting, John Abernathy, Brooke Beyer, Eric Rapley
Earnings Management Constraints: An Examination Of The Tradeoff Between Accruals-Based Earnings Management And Classification Shifting, John Abernathy, Brooke Beyer, Eric Rapley
Faculty and Research Publications
Prior literature has investigated three forms of earnings management: real earnings management (REM), accruals earnings management (AEM) and classification shifting. Managers make trade-off decisions among these methods based on the costs, constraints and timing of each strategy. This study investigates whether managers use classification shifting when their ability to use other forms of earnings management is constrained. We find that when REM is constrained by poor financial condition, high levels of institutional ownership and low industry market share, managers are more likely to use classification shifting. Further, we find that when AEM is constrained by low accounting system flexibility and …
Voluntary Audit Committee Characteristics, Incentives, And Aggressive Earnings Management: Evidence From New Zealand, V. D. Sharma, Chunli Kuang
Voluntary Audit Committee Characteristics, Incentives, And Aggressive Earnings Management: Evidence From New Zealand, V. D. Sharma, Chunli Kuang
Faculty and Research Publications
This study provides initial evidence on the association between voluntary audit committee characteristics, incentives and aggressive earnings management in New Zealand. Our results suggest audit committees comprising independent (non-executive) directors reduce (increase) the likelihood of aggressive earnings management. Financial expertise is associated with a lower likelihood of aggressive earnings management but only when the expertise is held by independent directors. Greater stock ownership by non-executive and executive directors serving on the audit committee increases the risk of aggressive earnings management. However, stock ownership by independent directors reduces this risk. Our results show that independent directors serving on other boards are …
Environmental Initiatives And Earnings Management, B. Litt, D. S. Sharma, V. D. Sharma
Environmental Initiatives And Earnings Management, B. Litt, D. S. Sharma, V. D. Sharma
Faculty and Research Publications
Purpose – The purpose of this paper is to provide initial evidence on the association between environmental initiatives and earnings management. Prior literature documents firms participating in environmental initiatives to report relatively stronger financial performance. Moreover, firms with superior performance have been shown to engage in greater levels of earnings management. A natural question that arises is to what extent do firms with environmental initiatives engage in earnings management to report better financial performance? Design/methodology/approach – The study draws on two theoretical frameworks, external monitoring and internal corporate culture, to predict an inverse association between environmental initiatives and earnings management. …