2012
DOI: 10.2139/ssrn.2061381
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Earnings Distribution Discontinuity from a Continuous Model of Earnings Management

Abstract: A parsimonious model is developed to understand two perplexing, salient features of the distributions of earnings, earnings change, and earnings surprise. The model provides guidance for empirical work to uncover the unmanaged earnings important to firm valuation and public scrutiny, yet unobserved by outside parties. Simulation results based on the model show that the puzzling volcano shape of the distributions can arise from the mixture of a spiky distribution of managed earnings with a bell-shaped distribut… Show more

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References 108 publications
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