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Discontinuities In Earnings Distributions: Evidence From South Africa

Author

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  • Joseph O. AKANDE

    (Department of Accounting Science, Walter Sisulu University, Mthatha, Eastern Cape, South Africa)

  • Adedeji D. GBADEBO

    (Department of Accounting Science, Walter Sisulu University, Mthatha, Eastern Cape, South Africa)

  • Ahmed O. ADEKUNLE

    (Department of Accounting Science, Walter Sisulu University, Mthatha, Eastern Cape, South Africa)

Abstract

There is increasing evidence that earnings management amongst firms creates discontinuity in the earnings distribution. We have verified the evidence of discontinuity in earnings distribution for 246 Johannesburg Securities Exchange listed firms from 2003 to 2018. The assets-scaled income was used as earnings measure to present the empirical histograms; the standardized difference test of significance was utilized to establish the existence of discontinuities at zero. The result shows discontinuities in distributions for earnings level and earnings-change. In addition, except for the unscaled earnings, the evidence supposes that the sample design does not explain the discontinuity in the earnings (earnings change) distributions.

Suggested Citation

  • Joseph O. AKANDE & Adedeji D. GBADEBO & Ahmed O. ADEKUNLE, 2023. "Discontinuities In Earnings Distributions: Evidence From South Africa," Oradea Journal of Business and Economics, University of Oradea, Faculty of Economics, vol. 8(2), pages 8-22, September.
    • Handle: RePEc:ora:jrojbe:v:8:y:2023:i:2:p:8-22
    DOI: http://doi.org/10.47535/1991ojbe169
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    References listed on IDEAS

    as
    1. Burgstahler, David & Chuk, Elizabeth, 2015. "Do scaling and selection explain earnings discontinuities?," Journal of Accounting and Economics, Elsevier, vol. 60(1), pages 168-186.
    2. Burgstahler, David & Dichev, Ilia, 1997. "Earnings management to avoid earnings decreases and losses," Journal of Accounting and Economics, Elsevier, vol. 24(1), pages 99-126, December.
    3. Degeorge, Francois & Patel, Jayendu & Zeckhauser, Richard, 1999. "Earnings Management to Exceed Thresholds," The Journal of Business, University of Chicago Press, vol. 72(1), pages 1-33, January.
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    More about this item

    Keywords

    earnings management; earnings discontinuity; standardized difference test; empirical histograms.;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General

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