Singh, Ashni K., Gore, Pelham and Pope, Peter (2007) Earnings management and the distribution of earnings relative to targets: UK evidence. Accounting and Business Research, 37 (2). pp. 123-149. ISSN 0001-4788
Full text not available from this repository.Abstract
In this paper we provide new evidence on discontinuities in the distribution of reported earnings, using a large sample of UK firms. We examine the discontinuity phenomenon in the context of earnings management. We report that the empirical distribution of earnings before discretionary working capital accruals does not reflect the unusually high frequencies of small surpluses and unusually low frequencies of small deficits relative to targets found in the distribution of actual (reported) earnings, i.e. after discretionary working capital accruals. We find that discretionary working capital accruals have the effect of significantly increasing the frequencies of firms achieving earnings targets both overall and by small margins. Thus, we document an explicit link between working capital accruals-based earnings management and the discontinuities observed in the empirical distribution of earnings relative to targets. We also examine earnings management before and after the issuance of FRS 3 ‘Reporting Financial Performance’ and find evidence that FRS 3 altered earnings management strategies adopted by companies.
| Item Type: | Article |
|---|---|
| Additional Information: | © 2007 The Authors |
| Divisions: | Accounting |
| Subjects: | H Social Sciences > HC Economic History and Conditions H Social Sciences > HG Finance |
| JEL classification: | J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure; Wage Differentials by Skill, Training, Occupation, etc. |
| Date Deposited: | 23 Oct 2013 13:03 |
| Last Modified: | 02 Apr 2024 23:11 |
| URI: | http://eprints.lse.ac.uk/id/eprint/53754 |
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