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Is there something rotten in Denmark? Earnings management to avoid small losses

Author

Listed:
  • Schøler, Finn

    (Department of Management Science and Logistics, Aarhus School of Business)

Abstract

This study focuses on earnings management by investigating the frequency distribution of the reported earnings in a European country. In particular, the relation between main “manageable” elements of working capital and reported earnings is examined. The modified and extended Jones model is used to identify and separate discretionary accruals in order to identify pre-managed earnings. By comparing the frequency distribution of these calculated pre-managed earnings and the reported earnings, it is shown that the combination of the research of earnings management based on studies of irregularities in the earnings frequency distribution and studies of discretionary accruals can be a powerful approach to examining the existence of earnings management

Suggested Citation

  • Schøler, Finn, 2006. "Is there something rotten in Denmark? Earnings management to avoid small losses," Financial Reporting Research Group Working Papers R-2006-04, University of Aarhus, Aarhus School of Business, Department of Business Studies.
    • Handle: RePEc:hhb:aarbfr:2006-004
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    File URL: http://www.hha.dk/afl/wp/rep/R_2006_04.pdf
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    Cited by:

    1. Holm, Claus & Schøler, Finn & Lønne, Henrik & Maingot, Michael, 2009. "A Study of the Adoption and Implementation of International Financial Reporting Standards in the Two EU Countries of Denmark and Ireland and New Zealand, a Non EU Country," Accounting Research Center Working Papers A-2009-01, University of Aarhus, Aarhus School of Business, Department of Business Studies.

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