search query: @indexterm Balance sheets / total: 133
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| Author: | Barton, J. Simko, P. J. |
| Title: | The Balance Sheet as an Earnings Management Constraint |
| Journal: | Accounting Review
2002 : VOL. 77:SUPPL, p. 1-34 |
| Index terms: | BALANCE SHEETS EARNINGS FORECASTING MANAGEMENT |
| Language: | eng |
| Abstract: | The balance sheet accumulates the effects of previous accounting choices, so the level of net assets partly reflects the extent of previous earnings management. The authors predict that managers' ability to optimistically bias earnings decreases with the extent to which the balance sheet overstates net assets relative to a neutral application of GAAP. To test this prediction, the authors examine the likelihood of reporting various earnings surprises for 3,649 firms during 1993-1999. Consistent with their prediction, the authors find that the likelihood of reporting larger positive or smaller negative earnings surprises decreases with their proxy for overstated net asset values. |
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