The Balance Sheet as an Earnings Management Constraint
Top Cited Papers
- 1 March 2002
- journal article
- Published by American Accounting Association in The Accounting Review
- Vol. 77 (s-1) , 1-27
- https://doi.org/10.2308/accr.2002.77.s-1.1
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. We 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, we examine the likelihood of reporting various earnings surprises for 3,649 firms during 1993–1999. Consistent with our prediction, we find that the likelihood of reporting larger positive or smaller negative earnings surprises decreases with our proxy for overstated net asset values.Keywords
This publication has 34 references indexed in Scilit:
- The rewards to meeting or beating earnings expectationsJournal of Accounting and Economics, 2002
- A Temporal Analysis of Earnings Surprises: Profits versus LossesJournal of Accounting Research, 2001
- Securities Price Consequences of the Private Securities Litigation Reform Act of 1995 and Related EventsThe Accounting Review, 2001
- Market Rewards Associated with Patterns of Increasing EarningsJournal of Accounting Research, 1999
- The Effect of Audit Quality on Earnings Management*Contemporary Accounting Research, 1998
- Discussion of “Are Accruals during Initial Public Offerings Opportunistic?”Review of Accounting Studies, 1998
- Causes and Consequences of Earnings Manipulation: An Analysis of Firms Subject to Enforcement Actions by the SEC*Contemporary Accounting Research, 1996
- Managing Financial Reports of Commercial Banks: The Influence of Taxes, Regulatory Capital, and EarningsJournal of Accounting Research, 1995
- Tests of Analysts' Overreaction/Underreaction to Earnings Information as an Explanation for Anomalous Stock Price BehaviorThe Journal of Finance, 1992
- Timely Aggregate Analyst Forecasts As Better Proxies for Market Earnings ExpectationsJournal of Accounting Research, 1991