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Earnings Management to Exceed Thresholds

Author

Listed:
  • François Degeorge

    (HEC Paris - Recherche - Hors Laboratoire - HEC Paris - Ecole des Hautes Etudes Commerciales)

  • Jayendu Patel
  • Richard Zeckhauser

Abstract

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.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • François Degeorge & Jayendu Patel & Richard Zeckhauser, 1997. "Earnings Management to Exceed Thresholds," Working Papers hal-00605613, HAL.
    • Handle: RePEc:hal:wpaper:hal-00605613
    as

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    Keywords

    Earnings Management; Exceed Thresholds;

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance

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