Accruals Management to Achieve Earnings Benchmarks: A Comparison of Pre‐managed Profit and Loss Firms

Barua, Abhijit; Legoria, Joseph; Moffitt, Jacquelyn Sue

doi:10.1111/j.1468-5957.2006.00017.x

Cited by 41 publications

(32 citation statements)

References 31 publications

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“…Sell companies are considered low profit companies, rendering them unable to effectively conduct income increasing earnings management [1]. This assumption is due to the following reasons; firstly, since sell companies are less vigilantly monitored by investors, their stock price are less susceptible to earnings news [17], making their earnings management ineffective in influencing investors' opinions [1]. In other words, sell companies cannot effectively manipulate and increase low profit to increase stock prices.…”

Section: Hypothesis Developmentmentioning

confidence: 99%

The Ability of Analysts' Recommendations to Predict Optimistic and Pessimistic Forecasts

et al. 2013

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Previous researches show that buy (growth) companies conduct income increasing earnings management in order to meet forecasts and generate positive forecast Errors (FEs). This behavior however, is not inherent in sell (non-growth) companies. Using the aforementioned background, this research hypothesizes that since sell companies are pressured to avoid income increasing earnings management, they are capable, and in fact more inclined, to pursue income decreasing Forecast Management (FM) with the purpose of generating positive FEs. Using a sample of 6553 firm-years of companies that are listed in the NYSE between the years 2005–2010, the study determines that sell companies conduct income decreasing FM to generate positive FEs. However, the frequency of positive FEs of sell companies does not exceed that of buy companies. Using the efficiency perspective, the study suggests that even though buy and sell companies have immense motivation in avoiding negative FEs, they exploit different but efficient strategies, respectively, in order to meet forecasts. Furthermore, the findings illuminated the complexities behind informative and opportunistic forecasts that falls under the efficiency versus opportunistic theories in literature.

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Section: Hypothesis Developmentmentioning

confidence: 99%

The Ability of Analysts' Recommendations to Predict Optimistic and Pessimistic Forecasts

et al. 2013

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“…Many concerns have been raised in this regard, also in relation to the possibility of managers implementing manipulative policies (Degeorge, Patel and Zeckhauser, 1999;Marquardt and Wiedman, 2004;Barua, Legoria, and Moffitt, 2006;Betty and Weber, 2006;Ramanna, 2008;Markarian, Pozza andPrencipe, 2008, Watts, 2003).…”

Section: Introductionmentioning

confidence: 99%

Assessing the Value Relevance of Goodwill Impairment Considering Country-Specific Factors: Evidence from EU Listed Companies

Laghi¹,

Mattei²,

Marcantonio³

2013

IJEF

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The objective of this paper is to assess the value relevance of goodwill impairment losses with reference to the listed companies operating in the European Union area during the period from 2008 to 2011. We investigate whether the information of goodwill impairment is a relevant factor that influences the investment decisions of market operators, testing the statistical significance and the explanatory power of a multivariate regression model widely known in literature for estimating market stock prices of companies using balance sheet data, including goodwill impairment. To this end, we select two samples of companies: a first group of listed companies operating in United Kingdom from 2008 to 2011 that is similar to the one used in previous researches on the same topic; a second group of firms operating in France, Germany, Italy, Portugal, Spain and United Kingdom that reported a goodwill impairment loss for the same period, to extend the analyses also to other economic contexts. Each sample is split into further subsamples differentiated in terms of country of domicile, reference year, industry sector and level of relative importance of goodwill impairments. We propose some changes to the original model, including a new explanatory variable aimed at considering also country-specific differences. The analyses of subsamples show that goodwill impairment is significant only for two years (2008 and 2009) and for French listed companies across all periods. Therefore, further investigation should help in understanding these differences that could be related to country-specific factors such as cultural, environmental and regulatory aspects.

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“…Inspiring by Barua et al (2006), we estimate abnormal accruals, a proxy for opportunistic earnings management, by using the following variation of the Modified Jones Model developed by Dechow et al (1995).…”

Section: Meeting Corporate Governance and Earnings Managementmentioning

confidence: 99%

Does Corporate Governance Matter in Meeting and Beating Analysts’ Forecasts

Maztoul¹

2014

IJBM

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Meeting and beating analysts' forecast has received substantial attention, most of studies investigate two principles problems: the valuation and value relevance of meeting and tools used to achieve benchmarks. This research is different, we investigate whether internal corporate governance impacts on meeting and beating analysts' forecasts and consistently do it, we also examine if these attributes alleviate opportunistic behavior.This paper contributes to the growing literature on earnings benchmarks, it targets to be more specified than previous ones by considering governance attributes without an index. Using a logistic regression models, we document that 'small' institutional investors and incentive compensation incite managers to meet analysts' forecasts contrarily to debt and board activity. We find that consistently meeting is harder to realize and affected by governance attributes. Moreover, results indicate that stock options are associated with opportunistic managerial activities while institutional ownership temperate it.This study is important for investors who must be more attentive about financial signals like meeting analysts' forecasts that may be affected by opportunistic managerial behavior. Furthermore, findings indicate that regulation affect this tendency which reveal the importance of regulators in increasing the transparency of financial market.

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Accruals Management to Achieve Earnings Benchmarks: A Comparison of Pre‐managed Profit and Loss Firms

Cited by 41 publications

References 31 publications

The Ability of Analysts' Recommendations to Predict Optimistic and Pessimistic Forecasts

The Ability of Analysts' Recommendations to Predict Optimistic and Pessimistic Forecasts

Assessing the Value Relevance of Goodwill Impairment Considering Country-Specific Factors: Evidence from EU Listed Companies

Does Corporate Governance Matter in Meeting and Beating Analysts’ Forecasts

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