Accounting Discretion: Use or Abuse? An Analysis of Restructuring Charges Surrounding Regulator Action

• 成果类型: Article
• 署名作者: Bens, Daniel A.; Johnston, Rick
• 署名单位: University of Arizona; University System of Ohio; Ohio State University
• 刊物名称: CONTEMPORARY ACCOUNTING RESEARCH
• ISSN/ISSBN: 0823-9150
• DOI: 10.1506/car.26.3.2
• 发表日期: 2009
• 页码: 673-+
• 关键词: earnings management; COSTS

摘要

This paper provides the first large sample empirical evidence on the extent to which restructuring charges are associated with earnings management. Furthermore, the study examines whether this association changed following action by the Financial Accounting Standards Board (FASB) and the Securities and Exchange Commission (SEC) to curtail suspected restructuring-related earnings management. We examine restructuring charges recorded between 1989 and 1992, a period when restructurings were virtually unregulated with respect to accounting guidance. We also analyze a sample of firms from 1995-96, a period when the FASB standardized accounting for restructurings and the SEC heightened scrutiny of these charges. Finally we examine a sample from 2001, a period when SEC scrutiny likely abated, but accounting rules remained constant. We use industry-specific tobit models to control for the portion of the restructuring attributable to fundamental economic performance and macroeconomic factors. We then estimate a multivariate regression to determine whether the excess restructuring charge (the actual charge less the expected amount per the first-stage model) is associated with earnings management proxies, a time dummy for reporting regime change, and interactions between the two. We document a significant decrease in the magnitude of excess restructuring charges after the FASB action. This holds irrespective of the level of SEC scrutiny. We also find that prior to FASB action, excess restructurings were associated with firms that ex ante had an incentive to take an earnings bath and those that ex post reversed the charge to increase income. This behavior abated following the new FASB guidance, but only during the period accompanied by higher SEC scrutiny.