Quarterly Earnings Patterns and Earnings Management

2007 ◽  
Author(s):  
Somnath Das ◽  
Pervin K. Shroff ◽  
Haiwen Zhang
Keyword(s):  
Earnings Management ◽  
Quarterly Earnings

scholarly journals Does The Market See Through Seasonal Quarterly Earnings Patterns?

2016 ◽  
Vol 32 (5) ◽  
pp. 1309
Author(s):  
John M. Carlson
Keyword(s):  
Earnings Management ◽  
Fourth Quarter ◽  
Dummy Variables ◽  
Quarterly Earnings ◽  
Interaction Terms ◽  
First Time

Evidence such as Das, Shroff, and Zhang (2009) suggests that firms routinely reverse their earnings pattern during their fourth quarter compared to that of last year, possibly leading to earnings management. Motivated by these findings, this study seeks to document whether the market sees through seasonal quarterly earnings patterns and reacts consistent with an earnings management hypothesis.  Using an amended Easton and Harris (1991) model, I study whether the earnings variables are more informative based upon the seasonal differencing patterns by incorporating dummy variables, along with their respective interaction terms, to signify the first time the pattern occurs.  My results show the market sees the seasonal quarterly earnings pattern; the earning levels and changes in earnings variables are more informative but the (managed) earnings tend to be transitory, not permanent in nature. All other tests performed support these general conclusions.

Asymmetric Monitoring of Quarterly Financial Statements by Big 4 Auditors and the SEC's Timely Review Requirement

2021 ◽  
Author(s):  
Carol Callaway Dee ◽  
Ayalew Lulseged ◽  
Tianming Zhang
Keyword(s):  
Earnings Management ◽  
Earnings Quality ◽  
Financial Statements ◽  
Seasoned Equity Offerings ◽  
Open Market ◽  
Equity Offerings ◽  
Audit Firm ◽  
Quarterly Earnings ◽  
Big 4 ◽  
Timely Review

We investigate if Big 4 firms are asymmetrically more effective than non-Big 4 firms in monitoring income-increasing vs. income-decreasing quarterly earnings management. We also study the Securities and Exchange Commission's (SEC) 2000 requirement that audit firm reviews of quarterly financial statements be completed prior to their filing with the SEC ("timely reviews"). We find Big 4 firms are more effective than non-Big 4 firms in curbing income-increasing earnings management around seasoned equity offerings (SEOs), but not income-decreasing earnings management around open market repurchases (OMRs). In the post-2000 period, after the SEC's mandate for timely reviews began, we find income-increasing earnings management around SEOs declined significantly, and this decline is primarily driven by the clients of Big 4 firms. We provide evidence that timely quarterly reviews improve earnings quality, especially when companies have incentives to engage in income-increasing accruals and are reviewed by Big 4 firms.

Quarterly Earnings Patterns and Earnings Management

2009 ◽  
Vol 26 (3) ◽  
pp. 797-831 ◽  
Author(s):  
Somnath Das ◽  
Pervin K. Shroff ◽  
Haiwen Zhang
Keyword(s):  
Earnings Management ◽  
Quarterly Earnings

Modeling Discretionary Accrual Reversal and the Balance Sheet as an Earnings Management Constraint

2011 ◽  
Vol 86 (4) ◽  
pp. 1189-1212 ◽  
Author(s):  
William R Baber ◽  
Sok-Hyon Kang ◽  
Ying Li
Keyword(s):  
Earnings Management ◽  
Balance Sheet ◽  
Earnings Forecasts ◽  
Discretionary Accruals ◽  
Quarterly Earnings ◽  
Discretionary Accrual ◽  
Current Period ◽  
Management Context ◽  
Empirical Implications ◽  
Empirical Analyses

ABSTRACT This study presents conceptual and empirical analyses of discretionary accrual reversal in the earnings management context. We specifically focus on the extent that income-increasing (decreasing) discretionary accruals initiated in a prior period reverse to become income-decreasing (increasing) accruals in the current period. The analysis suggests that the extent that such reversals constrain the ability to manage toward earnings objectives depends on both the magnitude of past accrual-based earnings management and the reversal speed of past discretionary accruals. To demonstrate the empirical implications of the analysis, we consider discretionary accrual reversal speed as an additional determinant of the balance sheet constraint on earnings management (Barton and Simko 2002). We show that, conditional on the magnitude of net operating asset overstatement, the probability of achieving quarterly earnings forecasts varies inversely with reversal speed.

Short-term management earnings forecasts and earnings management through real activities manipulation

2019 ◽  
Vol 28 (1) ◽  
pp. 110-138
Author(s):  
Bing Luo
Keyword(s):  
Earnings Management ◽  
Earnings Forecasts ◽  
Earnings Forecast ◽  
Management Earnings Forecasts ◽  
Short Term ◽  
Content Type ◽  
Quarterly Earnings ◽  
Real Activities Manipulation ◽  
External Shareholders ◽  
Term Management

Purpose The purpose of this paper is to investigate the association between managers’ short-term, quarterly earnings forecast characteristics and earnings management through real activities manipulation. Design/methodology/approach Using a propensity-score matched sample from 2000 to 2015, the author examines whether, compared to non-issuers, firms issuing short-term earnings forecasts exhibit abnormal levels of earnings management through the manipulation of real activities such as acceleration of sales, changes in shipment schedules and delaying R&D and maintenance expenditures. Findings The finding of this study suggests that firms actually engage in less real activities manipulation when they provide short-term management earnings forecasts. This result does not support the practitioners’ criticism that providing short-term management earnings forecasts increases earnings management. Instead, it suggests that providing management earnings forecasts can reduce information asymmetry between managers and external shareholders, thereby constraining managers’ opportunistic behaviors. Originality/value Practitioners have expressed concerns that issuing earnings forecasts may foster managerial myopia, therefore, increasing earnings management. However, recent empirical study found evidence that management earnings forecast mitigates accrual-based earnings management, which is inconsistent with practitioners’ view. This study hence aims to provide timely evidence to this debate by examining the relation between management earnings forecasts and real activities manipulation.

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