Earnings Management: Emerging Insights in Theory, Practice, and Research

Portada
Springer Science & Business Media, 2008 - 581 páginas

Earnings Management: Theory and Research is a scholarly study of earnings management. The book is aimed for scholars in accounting, finance, economics, and law. The authors address the following research questions: Why earnings are so important that firms feel compelled to manipulate them? What is earnings management? What set of circumstances will induce earnings management? How will the interaction among management, boards of directors, investors, employees, suppliers, customers and regulators affect earnings management? Can truthful reporting be considered earnings management? What are the motivations for smoothing and other reporting strategies? How to design empirical research addressing earnings management? What are the limitations and strengths of current empirical models?

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Contenido

Introduction
xii
The Demand for Earnings Management Research
xiv
The Milestones
xvi
The Plan of the Book
xviii
Acknowledgments
xix
Part 1
3
The Importance of Earnings
5
11 The Dual Role of Accounting
6
552 Earnings Management
277
56 The Press
281
Part 3
284
The Demand for Theory
287
The Plan of Part 3
289
Governance
290
Product and Factor Markets
291
TruthTelling
293

12 The Value Relevance of Earnings
8
121 The CostlyContracting Approach
10
122 The DecisionMaking Approach
15
123 The LegalPolitical Approach
19
13 Summary
23
Definition of Earnings Management
25
22 The Methods to Manage Earnings
31
23 Managing GAAP Earnings Through Pro forma Earnings
34
24 Summary
38
Part 2
39
The Players
41
The SarbanesOxley Act
43
The Motivation for the SarbanesOxley Act
44
Research on the SarbanesOxley Act
45
The Plan of Part 2
53
The Management
56
31 Background
58
312 The Managements Objective Function
60
32 Compensation
69
321 The Compensation Package
70
Salary and Bonus
74
323 Managing Salary
76
324 Managing Bonuses27
77
325 More on Managing Cash Compensation
80
327 Equity Holdings and Earnings Management
84
328 Options and Earnings Management
86
329 Grant Date
87
3210 Accounting Recognition
89
3211 Timing of the Exercise
91
3212 Related Operating Investment and Financing Decisions
92
33 CEO Turnover
93
332 CEO Departure and Earnings Management
96
333 The Incoming CEO
99
34 Insider Trading
101
341 Insider Trading and Earnings Management
108
35 Management Buyouts
110
Users
113
41 Shareholders
114
411 The PriceSetting Process
115
412 The Impact of Earnings on the Share Price
116
414 When Does the Market Learn About Nonneutral Earnings Management?
121
42 Earnings Management Events
135
422 Equity Issues and New Listings
145
423 Mergers and StockforStock Acquisitions
153
43 Bondholders and Other Creditors
156
432 The Importance of Earnings to Debt Contracts
159
433 Earnings Management and Debt Contracts42
161
44 Regulators
171
441 Tax Expense and Deferred Taxes
173
Insurance Companies and Banks
178
45 Employees
181
46 Competitors Suppliers and Customers
182
Appendix
184
Gatekeepers
187
52 Analysts
191
521 Background
192
522 Decision Making and Incentives
196
523 Analysts in the TWENTYFIRST Century
205
524 Meeting or Beating ExpectationsMBE
207
53 GovernanceOwnership
220
532 Shareholders
223
533 The Importance of Earnings
231
534 Earnings Management
234
54 Governancethe Board of Directors
236
542 Board Characteristics
242
55 Auditors
263
551 The Institutional Setting of the Relationships Between Auditors and Management Before SOX
264
611 The Disclosure Principle
295
612 Signaling Equilibria
296
613 Signal Jamming
298
614 Randomized Strategies
299
62 Governance
301
63 ProductFactor Markets
305
631 Credibility as a Valuable Asset
306
632 Tacit Cooperation Among Firms
308
633 Multiple Audiences Exert Conflicting Pressures
309
64 Regulation
311
641 The Financial Reports Insurance Setting
312
The Disclosure Principle
314
Smoothing
316
71 Capital Markets
319
712 The Banking System
325
72 Governance
328
721 Real Smoothing
329
722 Artificial Smoothing
332
73 Product Market Competition
333
74 Regulation
335
Artificial Smoothing Motivated by Consumption Smoothing
336
752 Issues
339
Maximization and Minimization
341
81 Capital Market
343
811 The Equilibrium
345
812 The Earnings Response Coefficient
347
82 Governance
353
83 The Competitive Environment
358
84 Regulation
361
843 The Effect of Earnings Management on the Value of Rule 10b5
363
844 The Effect of Regulation on Earnings Management
365
85 Summary
366
Part 4
370
Accruals
371
The Plan of Part 4
375
The Accruals Process
377
912 The Statistical Properties of Accruals
380
92 The Effect of Earnings Management on Accruals
381
921 The Statistical Properties of Managed Accruals
382
93 Accruals and Cash Flows
384
932 Highlights of the Research
385
Accruals when the Firm Carries Inventories The Model
387
Accruals
388
The Accruals Methodology
389
1011 Ronen and Sadan 1981
390
1012 Healy1985
394
1013 DeAngelo 1986 1988a
399
1014 Dechow and Sloan 1991
402
1015 The Jones Model
404
102 An Evaluation of the Jones Model
407
1022 Evaluations of the Jones Model
414
1023 The Tests of the Efficiency of the Jones Model
424
Modifications to the Jones Model and Alternative Methodologies
433
1111 The Modified Jones Model
434
1112 The ForwardLooking Model
437
1113 The PerformanceAdjusted Models
439
A Synthesis
446
112 Alternative Methodologies for Detecting Earnings Management
449
1121 Analysis of a Single Account
450
1122 The Distributional Approach
454
Summary and Postscript
457
Lessons
459
Related Research
460
Bibliography
462
Index
577
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Dr. Joshua Ronen, a leader in economic analysis, has more than 30 years of experience in economics, finance, accounting and research. He is Research Professor of Accounting at Stern School of Business, New York University, which he joned as a faculty member in 1973. From 1970 to 1974, he served on the faculty of the University of Chicago Business School. He received his BA in Accounting and Economics from the Hebrew University and his Ph.D. (1969) in Business Administration from Stanford University. He is also a licensed CPA in Israel and has practiced public accounting for seven years.

Dr. Ronen has served or is serving on numerous journals, including The Accounting Review, The Journal of Accounting Research, Accounting, Organizations and Society, Review of Quantitative Finance & Accounting, Journal of Accounting and Public Policy, The British Accounting Review, The Journal of International Financial Analysis. He also served as Editor-In-Chief of the Journal of Accounting, Auditing and Finance.

Dr. Varda Yaari is an Associate Professor at Morgan State University, Maryland, USA. 2002-2003: Senior Lecturer: Ben-Gurion University. 1998 - 2001: Lecturer: Ben-Gurion University. Coordinator of Accounting Area.

Dr. Yaari received his Ph.D. in Philosophy in 1989 from the Stern School of Business, NYU and his Master of Arts (Economics), 1979 from Tel-Aviv University.

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