Overvaluation and the Choice of Alternative Earnings Management Mechanisms

• 成果类型: Article
• 署名作者: Badertscher, Brad A.
• 署名单位: University of Notre Dame
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-10092
• 发表日期: 2011
• 页码: 1491-1518
• 关键词: balance-sheet; RESTATEMENTS; real; INFORMATION; valuation; accruals; FIRMS

摘要

In this study I examine how the degree and duration of overvaluation affect management's use of alternative within-GAAP earnings management, restrictions on further exploitation of within-GAAP accruals management, and subsequent non-GAAP earnings management. Further, I examine how one type of earnings management segues into another type as overvaluation persists. I present evidence that the longer the firm is overvalued, the greater is the amount of total earnings management. I also find that managers engage in accruals management in the early stages of overvaluation before moving to real transactions management, in order to sustain their overvalued equity. Finally, I find that the longer a firm is overvalued, the more likely it is to engage in one of the most egregious forms of earnings management, non-GAAP earnings management. Collectively, the results suggest that the duration of firm overvaluation is an important determinant of managements' choice of alternative earnings management mechanisms.