Industry Window Dressing

• 成果类型: Article
• 署名作者: Chen, Huaizhi; Cohen, Lauren; Lou, Dong
• 署名单位: University of London; London School Economics & Political Science; Harvard University; National Bureau of Economic Research; Centre for Economic Policy Research - UK
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhw020
• 发表日期: 2016
• 页码: 3354
• 关键词: earnings management; stock-prices; entry; returns; style; EXIT; INVESTMENT; EVOLUTION; attention; DYNAMICS

摘要

We explore a new mechanism by which investors take correlated shortcuts and present evidence that managers-using sales management-take advantage of these shortcuts. Specifically, we exploit a regulatory provision wherein a firm's primary industry is determined by the highest sales segment. Exploiting this regulation, we provide evidence that investors classify operationally nearly identical firms as starkly different depending on their placement around this sales cutoff. Moreover, managers appear to exploit this by manipulating sales to be just over the cutoff in favorable industries. Further evidence suggests that managers engage in activities to realize large, tangible benefits from this opportunistic action.