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Environmental uncertainty and managers' use of discretionary accruals

  • Ghosh, Dipankar
  • Olsen, Lori
Registered author(s):

    Although an organization's environmental uncertainty may induce greater variability in reported earnings, managers have incentives to reduce this variability. The flexibility accorded by generally accepted accounting principles (GAAP) provides managers the means to accomplish this via exercising discretion in recognizing accounting accruals. Thus, we examine the relation between managers' use of discretionary accruals and environmental uncertainty. Overall, evidence suggests managers use discretionary accruals to reduce the variability in reported earnings more when firms operate in high uncertainty.

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    File URL: http://www.sciencedirect.com/science/article/B6VCK-4T9JWB7-1/2/b4a27a037337566e8e055a1ffd52e381
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    Article provided by Elsevier in its journal Accounting, Organizations and Society.

    Volume (Year): 34 (2009)
    Issue (Month): 2 (February)
    Pages: 188-205

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    Handle: RePEc:eee:aosoci:v:34:y:2009:i:2:p:188-205
    Contact details of provider: Web page: http://www.elsevier.com/locate/aos

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