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Earnings Management to Exceed Thresholds

Listed author(s):
  • François Degeorge

    (HEC Paris - Recherche - Hors Laboratoire - GROUPE HEC)

  • Jayendu Patel
  • Richard Zeckhauser

Earnings provide important information for investment decisions. Thus, executives--who are monitored by investors, directors, customers, and suppliers--acting in self-interest and at times for shareholders, have strong incentives to manage earnings. The authors introduce behavioral thresholds for earnings management. A model shows how thresholds induce specific types of earnings management. Empirical explorations identify earnings management to exceed each of three thresholds: report positive profits, sustain recent performance, and meet analysts' expectations. The positive profits threshold proves predominant. The future performance of firms suspect for boosting earnings just across a threshold is poorer than that of control group firms. Copyright 1999 by University of Chicago Press.

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Paper provided by HAL in its series Working Papers with number hal-00605613.

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Date of creation: 1997
Publication status: Published in 1997
Handle: RePEc:hal:wpaper:hal-00605613
Note: View the original document on HAL open archive server: https://hal-hec.archives-ouvertes.fr/hal-00605613
Contact details of provider: Web page: https://hal.archives-ouvertes.fr/

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