Earnings Management to Exceed Thresholds
AbstractEarnings provide important information for investment decisions. Thus, executives--who are monitored by investors, directors, customers, and suppliers--acting in self-interest and at times for shareholders, have strong incentives to manage earnings. The authors introduce behavioral thresholds for earnings management. A model shows how thresholds induce specific types of earnings management. Empirical explorations identify earnings management to exceed each of three thresholds: report positive profits, sustain recent performance, and meet analysts' expectations. The positive profits threshold proves predominant. The future performance of firms suspect for boosting earnings just across a threshold is poorer than that of control group firms. Copyright 1999 by University of Chicago Press.
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Bibliographic InfoArticle provided by University of Chicago Press in its journal Journal of Business.
Volume (Year): 72 (1999)
Issue (Month): 1 (January)
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Web page: http://www.journals.uchicago.edu/JB/
Other versions of this item:
- Degeorge, François & Patel, U & Zeckhauser, Richard, 1998. "Earnings Management to Exceed Thresholds," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1790, C.E.P.R. Discussion Papers.
- G3 - Financial Economics - - Corporate Finance and Governance
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