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Processual earnings management: A study of R&D spending of french listed companies
[Gestion processuelle des résultats : une études des dépenses de R&D des entreprises françaises cotées]

Author

Listed:
  • Guillaume Dumas

    (LGCO - Laboratoire Gouvernance et Contrôle Organisationnel - UT3 - Université Toulouse III - Paul Sabatier - UT - Université de Toulouse)

Abstract

Two earnings management techniques are based on R&D expenditures: (i) reducing R&D spending and (ii) capitalization of R&D spend-ing. In this paper, we examine whether both techniques are used by French firms to meet earnings thresholds (zero earnings and prior year earnings). Firstly, we study each technique separately. Our results show that R&D spending iscapitalized in order to meet these thresholds, and managers reduce R&D in order to meet them. We then investigate whether managers use the two earnings management techniques in a coordinated way, and show that they are used in combination. More precisely, these earnings management techniques are substitutes for each other: low use of one is balanced by greater use of the other. We contribute to the literature by showing an earnings management process in which managers combine more than one earnings management technique.

Suggested Citation

  • Guillaume Dumas, 2017. "Processual earnings management: A study of R&D spending of french listed companies [Gestion processuelle des résultats : une études des dépenses de R&D des entreprises françaises cotées]," Post-Print hal-03018818, HAL.
    • Handle: RePEc:hal:journl:hal-03018818
    DOI: 10.3917/cca.232.0111
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    Cited by:

    1. Özgür, Arslan-Ayaydin & Thewissen, James & Torsin, Wouter, 2021. "Earnings Management Methods and CEO Political Affiliation," LIDAM Discussion Papers LFIN 2021017, Université catholique de Louvain, Louvain Finance (LFIN).

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