Digital Analysis Of Sales And Industry Partition: An Examination Of U.S. Public Companies

Geyer, Dominique

doi:10.19030/jabr.v28i2.6845

Cited by 2 publications

(2 citation statements)

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“…But once cannot consider this to be a rounding behavior because we do not observe significantly more zeros as second digits than what could be expected by mere chance according to Benford's law. This finding is consistent with the prior studies of Jordan, Clarke, and Hames (2009) and Geyer (2012), who choose the same control variable. The two studies did not find rounding behavior in the total assets data set.…”

Section: Methodssupporting

confidence: 91%

Detecting Cosmetic Debt Management Using Benfords Law

Geyer

Drechsler

2014

JABR

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Benfords law states that the frequency of first significant digit in certain samples decreases as those digits increase. This law is used in accounting to find rounding behavior. Several studies provided evidence that firms may round up earnings when they are just below reference points denoted by Nx10k. Most studies are focused on earnings variables. Few studies are focused on other accounting variables like sales for example (Jordan & Alii, 2009; Geyer, 2012). No previous study examines accounting variable from balance sheet (excepted earnings of course). The aim of this short paper is to investigate rounding behavior of long term debt. Using a sample of US public companies, we observe that US firms round down the total long term debt considering two cognitive points: Nx10k and (2xN+1)x5x10j (N is an integer between 1 to 9; k is an integer from 1 and j is an integer from 0). In other words, US public firms exercise Cosmetic Debt Management.

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Section: Methodssupporting

confidence: 91%

Detecting Cosmetic Debt Management Using Benfords Law

Geyer

Drechsler

2014

JABR

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“…Al -Darayseh et al (2000) documented the rounding-up behavior in case of reported earnings of companies listed in Istanbul Stock Market. Geyer (2012) studied the frequency of occurrence of zero in the second digit of reported sales and documented the existence of rounding-up behaviors in reported sales of US public companies. Darayseh et al (2010) demonstrated income enhancement in reported earnings of Gulf Cooperation Council (GCC) firms.…”

Section: Prior Research and Hypothesismentioning

confidence: 99%

Rounding-up in reported income numbers

Shette¹,

Kuntluru

2014

Review of Accounting and Finance

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Purpose – This paper aims to investigate the rounding-up in reported income numbers of Indian companies by examining the evidence of unusual occurrence of zero and nine in reported income numbers such as profit after tax and earnings per share (EPS). It also examines such rounding-up patterns under different scenarios such as companies varying across different time periods, income size, market capitalization, industries, initial public offering and earnings news. Design/methodology/approach – All 1,707 companies listed on National Stock Exchange of India were considered for analysis. This study covered a period of 21 years from 1991-1992 to 2011-2012. Data were collected from PROWESS database. Findings – In Indian companies, the rounding-up pattern in reported income numbers is in conformity with existing studies (Carslaw, 1988; Thomas, 1989). In case of income numbers, the observed proportionate occurrence of zero and nine is significantly different from the expected proportionate occurrence. The study found that anomalies in reported earnings vary across industry. Further, it is found that the per cent deviations are more in case of companies having high income levels, high market capitalization and with positive news. Research limitations/implications – In future studies, it will be interesting to develop a model reflecting the causes for such rounding-up of income numbers. Practical implications – The paper provides an insight analysis on the rounding-up behavior of Indian companies and facilitates the understanding of occurrence of such anomalies under various scenarios. This paper may be useful to all the users of accounting information. Originality/value – First study on examining the rounding-up of reported income numbers and EPS by companies in India.

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Digital Analysis Of Sales And Industry Partition: An Examination Of U.S. Public Companies

Cited by 2 publications

References 10 publications

Detecting Cosmetic Debt Management Using Benfords Law

Detecting Cosmetic Debt Management Using Benfords Law

Rounding-up in reported income numbers

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