Takashi Obinata (Faculty of Economics, University of Tokyo)
Abstract
This paper investigates the value relevance of earnings components in the income statement, paying attention to the inter-period allocation of earnings. While prior studies only examine the pattern of allocation, this research examines both the relationship between the components in the year and the trends of components across years. The results show that the firms achieving income smoothing, loss avoidance and big bath, which are identified by the behavior of earnings components, have the different relevance of earnings from other firms. These results imply that dividing earnings into components enables investors to detect the earnings management and that earnings information becomes more useful when investors use the information of earnings components in the income statement.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. 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.
Publisher Info
Paper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE J-Series with number
CIRJE-J-140.