How Common Are Intentional GAAP Violations? Estimates from a Dynamic Model

• 成果类型: Article
• 署名作者: Zakolyukina, Anastasia A.
• 署名单位: University of Chicago
• 刊物名称: JOURNAL OF ACCOUNTING RESEARCH
• ISSN/ISSBN: 0021-8456
• DOI: 10.1111/1475-679X.12190
• 发表日期: 2018
• 页码: 5-44
• 关键词: managerial compensation; earnings management; moral hazard; manipulation; FIRMS; irregularities; CONSEQUENCES; RESTATEMENTS; determinants; ENFORCEMENT

摘要

This paper uses data on detected misstatementsearnings restatementsand a dynamic model to estimate the extent of undetected misstatements that violate GAAP. The model features a CEO who can manipulate his firm's stock price by misstating earnings. I find the CEO's expected cost of misleading investors is low. The probability of detection over a five-year horizon is 13.91%, and the average misstatement, if detected, results in an 8.53% loss in the CEO's retirement wealth. The low expected cost implies a high fraction of CEOs who misstate earnings at least once at 60%, with 2%-22% of CEOs starting to misstate earnings in each year 2003-2010, inflation in stock prices across CEOs who misstate earnings at 2.02%, and inflation in stock prices across all CEOs at 0.77%. Wealthier CEOs manipulate less, and the average misstatement is larger in smaller firms.