This paper examines the link between the amount of estimation needed during the accrual generating process and the persistence of the accruals portion of earnings. We measure the amount of estimation needed during the accrual generating process using the number of estimation-related linguistic cues in the notes to the financial statements and the critical accounting policies section of the mana...

This study aims to examine the quality of accrual having economic consequences in predicting future cash flows manufacturing companies listed on Indonesia Stock Exchange (IDX) for 2017-2019 period. The population this were all (IDX), research sample was determineted using pusposive sampling method with a total 213 companies. data used is secondary from company’s annual report. analytical i mult...

We examine whether earnings management spreads from firm to firm via board connections. We find that contagion of accounting quality occurs via directors in interlocking boards with other firms. A firm with director links to firms that restated earnings tends to have poorer accounting quality and higher likelihood of restating its own financial reports. A firm with director links to firms that ...

Prior research has estimated piece-meal the determinants of audit fees, non-audit fees and abnormal accruals. Intuition, informal analysis, and a variety of theories suggest that audit fees, non-audit fees, and abnormal accruals are jointly determined. We address this endogeneity issue by modeling the confluence of audit fees, fees for non-audit services and abnormal accruals in a system of sim...

Motivated by the findings that the aggregate (discretionary) accruals positively predicts oneyear-ahead firm-level stock returns and that there is a considerable amount of co-movement in firm-level (discretionary) accruals, we decompose firm-level (discretionary) accruals into a market-wide component and a firm-specific component. We document robust evidence that the two orthogonal (discretiona...

This study examines whether firms just above and just below three earnings benchmarks (loss avoidance, earnings changes, and analyst forecast) have differing levels of discretionary accruals. If discretionary accruals are a measure of earnings management, then firms above (benchmark beaters) and firms below a benchmark should have differing levels of discretionary accruals. Dechow et al. (2003)...

I examine whether managerial stock and options holdings influence the propensity of goingpublic firms to manipulate financial information, as measured by the incidence of shareholder class action lawsuits and discretionary accruals. Examining a sample of U.S. firms that went public during the years 1996-2006, I find some evidence that firms in which top managers receive large stock options gran...

Despite the large number of papers purporting to identify earnings management, the current techniques used to identify it are sorely lacking. In general, they are based on the assumption that accruals unexplained by a linear projection on firm-level observables (i.e., discretionary accruals) represent either explicit earnings management or poor quality earnings.1 Namely, these techniques assume...