Insider sales and earnings management

Park, Myung Seok; Park, Taewoo

doi:10.1016/j.jaccpubpol.2004.07.003

Cited by 61 publications

(35 citation statements)

References 31 publications

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“…The empirical evidence shows a marginally significant positive correlation between DA and AS before insider selling. As in Beneish and Vargus (2002) and Park and Park (2004), this study replicates their analyses by partitioning the selling sample into normal and abnormal selling sub-samples in accordance with trading size, and finds the positive correlation to be stronger in the abnormal selling subsample. Consistent with insiders using DA and AS as complements, the results show that firms selling more assets have higher levels of DA, and vice versa.…”

supporting

confidence: 55%

“…Elitzur and Yaari (1995) and Park and Park (2004) manifest a positive relationship between managers' net purchases and DA. No study has assessed the association between AS and insider trading activities.…”

Section: Control Variables To All Equationsmentioning

confidence: 94%

“…Elitzur and Yaari (1995) provide theoretical evidence that there is a positive (negative) relationship between managers' purchases (sales) and DA. Park and Park (2004) demonstrate that insiders adjust DA to increase current earnings so that they are able to sell their stocks subsequently. Bartov and Mohanram (2004) document a significantly higher DA before managers exercise their employee warrants.…”

mentioning

confidence: 94%

“…The alignment of insiders' personal wealth with the stock price performance motivates them to exploit their power over earnings management (EM) decisions (Bergstresser and Philippon 2006). In particular, EM is motivated by the insiders' need to manage earnings so that they are able to realize (avoid) significant capital gains (losses) by trading for their own accounts (Elitzur and Yaari 1995;Beneish and Vargus 2002;Park and Park 2004;Bergstresser and Philippon 2006;Ronen et al 2006).…”

mentioning

confidence: 99%

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The joint decision to manage earnings through discretionary accruals and asset sales around insider trading: Taiwan evidence

Huang

2008

J Econ Finan

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supporting

confidence: 55%

Section: Control Variables To All Equationsmentioning

confidence: 94%

mentioning

confidence: 94%

mentioning

confidence: 99%

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The joint decision to manage earnings through discretionary accruals and asset sales around insider trading: Taiwan evidence

Huang

2008

J Econ Finan

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“…Earnings are managed to affect management compensation from bonus plans (e.g., Healy 1985, Gaver et al 1995Guidry et al 1999) and from stock and stock option values (e.g., Bergstresser and Philippon 2006). Perry and Williams (1994) show that firms manage earnings down prior to management buyouts to lower stock prices and thus the price of the buyout, and Park and Park (2004) show that firms manage earnings up prior to insider sales to increase the proceeds of those sales.…”

Section: Which Firms Manage Earnings?mentioning

confidence: 99%

Earnings Management and the Financial Statement Analyst

Hall

Agrawal

2013

AFR

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This paper reviews earnings management literature from the perspective of the financial statement analyst. The analyst will want to know if the company being analyzed is likely to have manipulated or managed the financial statement numbers, which numbers in the financial statements are most likely to have been managed, and the magnitude of the management.For several decades researchers have been documenting the manipulation or management of financial statement numbers. They have documented various management devices and a host of contexts that provide incentive to manage. Yet, this review reveals that an individual analyst, working to understand a single company, has little to guide him or her in assessing the probability that the firm under consideration has managed financial statement numbers, which numbers may have been managed, and to what extent they may have been managed. While much work has been done and many papers published, the hard work of making the research useful to the financial statement user remains to be done.

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The Role of Earnings Management in Equity Valuation

Shen

2021

Encyclopedia of Finance

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The intrinsic value of a firm's equity is determined by the present value of future payoffs to equity-holders. Thus, to estimate equity value, one needs to identify and process a series of information that is relevant to the present value of expected future payoffs. Among the valuerelevant information, earnings pertain to a summary measure of firm performance, and thus play a key role in the equity valuation. Nevertheless, it is not uncommon in practice that firm managers either intentionally or unintentionally misreport earnings, making valuation challenging for outsiders. This chapter aims to explore the role earnings management plays in equity valuation, and how market participants may detect and adjust for misreported earnings, if any, in their forecasts and valuation for a firm. The chapter is organized to comprise the following sections: (i) varied managerial incentives for earnings management; (ii) various tactics of earnings management via accruals manipulation; (iii) various tactics of earnings management via real activities manipulation; (iv) consequences and determinants of earnings management; (v) trade-off between accruals manipulation and real activities manipulation to manage earnings; (vi) how to discern and measure earnings management; (vii) introduction of various equity-valuation models; (viii) how to adjust for the effects of accruals-based and real earnings management in equity valuation.

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Insider sales and earnings management

Cited by 61 publications

References 31 publications

The joint decision to manage earnings through discretionary accruals and asset sales around insider trading: Taiwan evidence

The joint decision to manage earnings through discretionary accruals and asset sales around insider trading: Taiwan evidence

Earnings Management and the Financial Statement Analyst

The Role of Earnings Management in Equity Valuation

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