Earnings Rounding-up Behavior and Earnings Management
AbstractThis research starts with the assumption that, in Taiwanese companies listed as "Emerging," earnings are manipulated to surpass a cognitive reference point denoted by ¡uN*10k¡v, as has been documented by Carslaw (1988) and Thomas (1989). This paper investigates whether similar manipulation exists in companies listed as TSEC and TOC listed as well. Furthermore, we extend Carslaw's (1988) and Thomas's (1989) research by examining whether managers manipulate discretionary accruals (DAs) and working capital items, representing relatively low earnings management costs to make earnings exceed such a cognitive reference point. The result shows that the listed companies of Taiwan manipulate earnings to surpass this cognitive reference point. However, this phenomenon is less significant for negative earnings than it is for positive earnings. This phenomenon is even more significant for listed companies than for emerging companies. Finally, the higher the levels of DA and working capital are, the more significant such phenomena are; this implies that DA and working capital items are used to round up earnings, and managers report earnings numbers that exceed the cognitive reference point.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by College of Business, Feng Chia University, Taiwan in its journal Journal of Economics and Management.
Volume (Year): 5 (2009)
Issue (Month): 1 (January)
earnings management; number cognitive; discretionary accruals; rounding earnings numbers;
Find related papers by JEL classification:
- G39 - Financial Economics - - Corporate Finance and Governance - - - Other
- M41 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - Accounting
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Yi-Ju Su).
If references are entirely missing, you can add them using this form.