How Pervasive Is Earnings Management? Evidence from a Structural Model

• 成果类型: Article
• 署名作者: Bertomeu, Jeremy; Cheynel, Edwige; Li, Edward Xuejun; Liang, Ying
• 署名单位: Washington University (WUSTL); City University of New York (CUNY) System; Baruch College (CUNY); University System of Georgia; Georgia State University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2020.3717
• 发表日期: 2021
• 页码: 5145-5162
• 关键词: earnings management; structural estimation; Financial accounting; reporting; signaling

摘要

Although researchers often view earnings management as being widespread, measuring the cost and level of earnings management is a nontrivial task. We derive a measure of earnings management cost and the associated equilibrium level of earnings management from the cross-sectional properties of earnings and prices. This approach enables us to separate economic shocks from reporting discretion by modeling the economic tradeoff faced by management. The tradeoff can be easily estimated from a closed-form likelihood function. Consistent with prior studies, the measure suggests more earnings management during seasoned equity offerings, for smaller and growing firms, as well as in industries with more irregularities.