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Are Unmanaged Earnings Always Better for Shareholders?

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Author Info

  • Anil Arya
  • Shyam Sunder
  • Jonathan Glover

Abstract

The push for increased transparency in financial reporting and corporate governance serves shareholders only up to a limit. The problem of assessing the value of transparency to shareholders is subtle because both the level and pattern of earnings can convey information. Even when earnings management conceals information, it can be beneficial to shareholders. Distinguishing between ex ante and ex post efficiency underscores the advantages of achieving a balance between transparency and privacy in corporations.

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File URL: http://icfpub.som.yale.edu/publications/2551
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Bibliographic Info

Paper provided by Yale School of Management in its series Yale School of Management Working Papers with number ysm295.

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Date of creation: 01 Nov 2002
Date of revision: 01 Feb 2003
Handle: RePEc:ysm:somwrk:ysm295

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Web page: http://icf.som.yale.edu/
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Related research

Keywords: Earnings Management;

References

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  1. Arya, A. & Glover, J., 1999. "Aggregate Performance Measures as a Response to One-Side Error Correction," GSIA Working Papers 1999-21, Carnegie Mellon University, Tepper School of Business.
  2. Jonathan C. Glover & Anil Arya & Shyam NMI Sunder, 1999. "Earnings Management and the Revelation Principle," Yale School of Management Working Papers ysm120, Yale School of Management.
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Citations

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Cited by:
  1. Yuko Katsuo, 2008. "Earnings quality, accruals and subjective goodwill accounting," LSE Research Online Documents on Economics 6912, London School of Economics and Political Science, LSE Library.
  2. Benito Arruñada, 2011. "Mandatory accounting disclosure by small private companies," European Journal of Law and Economics, Springer, vol. 32(3), pages 377-413, December.
  3. repec:eme:mfipps:v:36:y:2010:i:3:p:485-507 is not listed on IDEAS
  4. Chisari, Omar O. & Ferro, Gustavo, 2009. "Gobierno Corporativo: los problemas, estado actual de la discusión y un ejercicio de medición para Argentina
    [Corporate Governance: the problems, the current stage of the discussion and a measure
    ," MPRA Paper 15630, University Library of Munich, Germany.
  5. Shyam Sunder, 2011. "Paradox of Writing Clear Rules: Interplay of Financial Reporting Standards and Engineering," The Japanese Accounting Review, Research Institute for Economics & Business Administration, Kobe University, vol. 1, pages 119-130, December.
  6. Ghosh, Dipankar & Olsen, Lori, 2009. "Environmental uncertainty and managers' use of discretionary accruals," Accounting, Organizations and Society, Elsevier, vol. 34(2), pages 188-205, February.
  7. Gao, Pingyang, 2008. "Disclosure Quality, Cost of Capital, and Investors’ Welfare," MPRA Paper 9478, University Library of Munich, Germany, revised Jun 2008.
  8. Rusmin Rusmin, 2010. "Auditor quality and earnings management: Singaporean evidence," Managerial Auditing Journal, Emerald Group Publishing, vol. 25(7), pages 618-638, July.
  9. Badertscher, Brad A. & Collins, Daniel W. & Lys, Thomas Z., 2012. "Discretionary accounting choices and the predictive ability of accruals with respect to future cash flows," Journal of Accounting and Economics, Elsevier, vol. 53(1), pages 330-352.
  10. Chi, Jianxin (Daniel) & Gupta, Manu, 2009. "Overvaluation and earnings management," Journal of Banking & Finance, Elsevier, vol. 33(9), pages 1652-1663, September.
  11. Timothy Fogarty & Michel Magnan & Garen Markarian & Serge Bohdjalian, 2009. "Inside Agency: The Rise and Fall of Nortel," Journal of Business Ethics, Springer, vol. 84(2), pages 165-187, January.
  12. Jiraporn, Pornsit & Miller, Gary A. & Yoon, Soon Suk & Kim, Young S., 2008. "Is earnings management opportunistic or beneficial? An agency theory perspective," International Review of Financial Analysis, Elsevier, vol. 17(3), pages 622-634, June.
  13. Bo Sun, 2010. "Asset Returns with Earnings Management," 2010 Meeting Papers 5, Society for Economic Dynamics.
  14. Kenneth J. Hunsader & Gwendolyn Pennywell, 2011. "Earnings management and the stock market response to the Sarbanes-Oxley Act based on a measure of competitive strategy," Review of Accounting and Finance, Emerald Group Publishing, vol. 10(4), pages 368-384, November.

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