The use of advertising activities to meet earnings benchmarks: evidence from monthly data

• 成果类型: Article
• 署名作者: Cohen, Daniel; Mashruwala, Raj; Zach, Tzachi
• 署名单位: University System of Ohio; Ohio State University; New York University; University of Illinois System; University of Illinois Chicago; University of Illinois Chicago Hospital
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-009-9105-8
• 发表日期: 2010
• 页码: 808-832
• 关键词: life-cycle; management

摘要

Using a unique database of monthly media advertising spending, we examine whether managers engage in real earnings management to meet quarterly financial reporting benchmarks. We extend prior literature by (1) separately analyzing advertising activities, allowing us to explore the possibility that managers could reduce or boost advertising to meet benchmarks; (2) analyzing actual activities as opposed to inferring them from reported expenses, which are also subject to accrual choices; (3) investigating the timing, within a quarter, of altered advertising spending; and (4) examining quarterly earnings benchmarks. We find that managers, on average, reduce advertising spending to avoid losses and earnings decreases. However, we also report that firms in the late stages of their life cycle increase advertising to meet earnings benchmarks. Finally, we find some evidence that firms increase advertising in the third month of a fiscal quarter and in the fourth quarter to beat prior year's earnings.