ASSET RETURNS UNDER PERIODIC REVELATIONS OF EARNINGS MANAGEMENT

• 成果类型: Article
• 署名作者: Sun, Bo
• 署名单位: Peking University
• 刊物名称: INTERNATIONAL ECONOMIC REVIEW
• ISSN/ISSBN: 0020-6598
• DOI: 10.1111/iere.12048
• 发表日期: 2014
• 页码: 255-282
• 关键词: bonus schemes; MODEL

摘要

The article investigates stock return dynamics in an environment where executives have an incentive to maximize their compensation by artificially inflating earnings. A principal-agent model with financial reporting and managerial effort is embedded in a Lucas asset-pricing model with periodic revelations of the firm's underlying profitability. The return process generated from the model is consistent with a range of empirical regularities observed in the return data: volatility clustering, asymmetric volatility, and high idiosyncratic volatility. The calibration results further indicate that earnings management can be quantitatively important in accounting for the dynamic patterns of stock returns.