Reporting discretion and private information communication through earnings
成果类型：
Article
署名作者：
Sankar, MR; Subramanyam, KR
署名单位：
University of Southern California
刊物名称：
JOURNAL OF ACCOUNTING RESEARCH
ISSN/ISSBN：
0021-8456
DOI：
10.1111/1475-679X.00017
发表日期：
2001
页码：
365-386
关键词：
摘要：
We model a two-period pure exchange economy where a risk averse manager, who has private information regarding future earnings, is required to issue an earnings report to investors at the end of each period. While the manager is prohibited from directly disclosing her private information, she is allowed to bias reported earnings in the first period, subject to GAAP rules that require that a specified proportion of the bias be reversed subsequently. We show there is a minimum threshold of reversal, such that, when the proportion of required reversal is above this threshold, the manager smooths income and communicates her private information through reported earnings. Consequently, the market attaches greater weight to reported earnings than under a regime that allows no discretion. When the required reversal is below the minimum threshold, the manager increases reported earnings without limit and the equilibrium degenerates. When the manager is not endowed with any private information, the market unravels the true earnings and price is unaffected by earnings management. Our results underscore the importance of both allowing and restricting reporting discretion through formal mechanisms.
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