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The role of accounting disaggregation in detecting and mitigating earnings management

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Listed:
  • Eli Amir

    (Tel Aviv University
    City University of London)

  • Eti Einhorn

    (Tel Aviv University)

  • Itay Kama

    (Tel Aviv University)

Abstract

Though ample empirical evidence alludes to the importance of disaggregated accounting data in the context of earnings management, extant theory considers biases in reporting mostly at the aggregated level of the accounting report. By introducing accounting disaggregation into the conventional theoretical framework of earnings management, this study highlights the essential role that disaggregated accounting data play in detecting and mitigating reporting manipulations. Disaggregated reports are shown to be especially effective when they consist of accounting items that are tightly interrelated by their fundamental economic nature, differ considerably in their sensitivity to reporting manipulations, and vary in their signs.

Suggested Citation

  • Eli Amir & Eti Einhorn & Itay Kama, 2014. "The role of accounting disaggregation in detecting and mitigating earnings management," Review of Accounting Studies, Springer, vol. 19(1), pages 43-68, March.
    • Handle: RePEc:spr:reaccs:v:19:y:2014:i:1:d:10.1007_s11142-012-9220-9
    DOI: 10.1007/s11142-012-9220-9
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    Keywords

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    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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