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Real earnings management in the motion picture industry: strengthening the inferences from academic research

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  • George Foster

    (Stanford University)

Abstract

The Gong, Young, and Zhou (GYZ) (Gong et al. 2023) paper examines potential earnings management by movie studio companies. Using a large sample of 3094 US-produced English-language movies released between 1997 and 2019, they find that movie studio companies, when faced with a below expected US box office revenue yield from their movies in a specific quarter, move up the release dates of movies with high expected revenues. This “move-up” release is an example of what the accounting research literature calls real earnings management. This commentary on GYZ (Gong et al. 2023) adds more structure to the decision-making context in which movie release dates are set, placing greater emphasis on the role of movie screening companies, which have the final say on the release dates for the movies they show on their screens. It also highlights the rich information setting that exists in the motion picture industry, which can be further exploited to probe the reliability of the earnings management findings reported by GYZ (Gong et al. 2023). This rich information includes security analyst reports and screen days available to quarter-end for each movie released. The commentary has relevance for other research in specific industries where the institutional domain has the potential to provide insight into real earnings management.

Suggested Citation

  • George Foster, 2023. "Real earnings management in the motion picture industry: strengthening the inferences from academic research," Review of Accounting Studies, Springer, vol. 28(3), pages 1250-1262, September.
    • Handle: RePEc:spr:reaccs:v:28:y:2023:i:3:d:10.1007_s11142-023-09798-1
    DOI: 10.1007/s11142-023-09798-1
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    References listed on IDEAS

    as
    1. James Jianxin Gong & Wim A. Van der Stede & S. Mark Young, 2011. "Real Options in the Motion Picture Industry: Evidence from Film Marketing and Sequels," Contemporary Accounting Research, John Wiley & Sons, vol. 28(5), pages 1438-1466, December.
    2. Ball, R & Foster, G, 1982. "Corporate Financial-Reporting - A Methodological Review Of Empirical-Research - Reply," Journal of Accounting Research, Wiley Blackwell, vol. 20, pages 245-248.
    3. Ball, R & Foster, G, 1982. "Corporate Financial-Reporting - A Methodological Review Of Empirical-Research," Journal of Accounting Research, Wiley Blackwell, vol. 20, pages 161-234.
    4. Dechow, Patricia & Ge, Weili & Schrand, Catherine, 2010. "Understanding earnings quality: A review of the proxies, their determinants and their consequences," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 344-401, December.
    5. McNichols, Maureen F., 2000. "Research design issues in earnings management studies," Journal of Accounting and Public Policy, Elsevier, vol. 19(4-5), pages 313-345.
    6. James Jianxin Gong & S. Mark Young & Aner Zhou, 2023. "Real earnings management and the strategic release of new products: evidence from the motion picture industry," Review of Accounting Studies, Springer, vol. 28(3), pages 1209-1249, September.
    7. 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.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Earnings management; Revenue acceleration; Movie industry sector; Research design;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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