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| Author: | Roychowdhury, S. |
| Title: | Earnings management through real activities manipulation |
| Journal: | Journal of Accounting & Economics
2006 : DEC, VOL. 42:3, p. 335-370 |
| Index terms: | capital markets accounting earnings |
| Language: | eng |
| Abstract: | In this paper, evidence is found consistent with managers manipulating real activities (here as: r-acts.) to avoid reporting annual losses. Especially, evidence is found suggesting price discounts to temporarily increase sales, overproduction to report lower cost of goods sold, and reduction of discretionary expenditures to improve reported margins. Cross-sectional analysis reveals that r-acts. are less prevalent in the presence of sophisticated investors. Other factors influencing r-acts. manipulation (as: mnpl.) include industry membership, the stock of inventories and receivables, and incentives to meet zero earnings. In addition, there is also some evidence of r-acts. mnpl. to meet annual analyst forecasts. |
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