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Environmental uncertainty and managers' use of discretionary accruals

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  • Ghosh, Dipankar
  • Olsen, Lori
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    Abstract

    Although an organization's environmental uncertainty may induce greater variability in reported earnings, managers have incentives to reduce this variability. The flexibility accorded by generally accepted accounting principles (GAAP) provides managers the means to accomplish this via exercising discretion in recognizing accounting accruals. Thus, we examine the relation between managers' use of discretionary accruals and environmental uncertainty. Overall, evidence suggests managers use discretionary accruals to reduce the variability in reported earnings more when firms operate in high uncertainty.

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    Bibliographic Info

    Article provided by Elsevier in its journal Accounting, Organizations and Society.

    Volume (Year): 34 (2009)
    Issue (Month): 2 (February)
    Pages: 188-205

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    Handle: RePEc:eee:aosoci:v:34:y:2009:i:2:p:188-205

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    Web page: http://www.elsevier.com/locate/aos

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    Cited by:
    1. Dan Dacian Cuzdriorean, 2013. "Most Recent Findings In Earnings Management Area: Interesting Insights From Traditionally Top 5 Leading Accounting Journals," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 2(15), pages 5.

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