We analyze the financial statements of 58,653 firm-years from 34 countries for the period 1985-1998 to construct a panel data set measuring three dimensions of reported accounting earnings for each country – earnings aggressiveness, loss avoidance, and earnings smoothing. We hypothesize that these three dimensions are associated with uninformative or opaque earnings, and so we combine these thr...

To investigate how the possibility of earnings manipulation affects managerial compensation contracts, we study a two period agency setting in which a firm’s manager can engage in “window dressing” activities to manipulate reported accounting earnings. Earnings manipulation boosts the reported earnings in one period at the expense of the reported earnings in the other period. We show that the p...

Essays in Accounting Theory: Corporate Earnings Management in a Dynamic Setting and Public Disclosure in the Financial Services Industry

We examine whether the information content of earnings is inversely related to the degree of conformity between financial accounting income and taxable income. Our inquiry exploits a natural experiment first examined by Guenther et al. (1997) in which a set of U.S. firms were forced to increase their book-tax conformity as a result of a change in the tax law. We find evidence consistent with th...

—The scope of the existing literatures about loss firms includes the value relevance of accounting earnings, the heterogeneity of the value of the loss companies, the value drivers and driving mechanism of the loss corporations and the relation between the loss reversibility and the value of the loss corporations. They found some perspectives and experiences which will benefit the valuation of ...

Sloan (1996) is the first to document the accruals anomaly, the negative relation between accruals and subsequent stock returns. In this paper I investigate the effects of the recent and prominent adoption of fair-value accounting on the market valuation of accruals. Using a sample of firm-years from 2003 to 2005, I find that investors rationally price different earnings components when setting...

South Africa is an important country within the continent of Africa. Its full adoption of International Financial Reporting Standards (IFRS) in 2005 for listed firms is unique. In this paper, I study the effects of IFRS adoption on accounting quality. I define accounting quality as earnings quality and value relevance, and hypothesize that both will increase post IFRS adoption. In a variety of ...

Predictability and variability are two measures commonly used in the empirical literature to gauge the quality of earnings and hence, decision usefulness to investors. We adopt both measures to investigate empirically the relative quality of Stern Stewart’s measure of economic value added (EVA) compared to GAAP earnings, residual income, cash flows and other mandated metrics in the US and UK. W...

This paper seeks to provide an explanation for why corporate officers manage the disclosure of accounting information. We show that earnings management affects firm value when value-maximizing managers and investors are asymmetrically informed. In equilibrium, the strategic management of reported earnings influences investors' assessments of the market values of companies' shares.