Title: Earnings Management? The Shapes of the Frequency Distributions of Earnings Metrics Are Not Evidence Ipso Facto
Abstract: Journal of Accounting ResearchVolume 43, Issue 4 p. 557-592 Earnings Management? The Shapes of the Frequency Distributions of Earnings Metrics Are Not Evidence Ipso Facto CINDY DURTSCHI, CINDY DURTSCHI Utah State UniversitySearch for more papers by this authorPETER EASTON, PETER EASTON University of Notre Dame.Search for more papers by this author CINDY DURTSCHI, CINDY DURTSCHI Utah State UniversitySearch for more papers by this authorPETER EASTON, PETER EASTON University of Notre Dame.Search for more papers by this author First published: 21 June 2005 https://doi.org/10.1111/j.1475-679X.2005.00182.xCitations: 229 We thank Eli Amir, Ray Ball, Brian Bhushee, Dave Burgstahler, Keji Chen, Ted Christensen, Joe Comprix, Doron Nissim, Tom Frecka, Rosemary Fullerton, Susan Havranek, Lorie Marsh, Jeff Miller, Fred Mittlestaedt, Steve Monahan, Tim Loughran, Gyung Paik, Stephen Penman, workshop participants at Arizona State University, Brigham Young University, Columbia University, INSEAD, London Business School, Monash University, Tilburg University, University at Buffalo, University of Melbourne, University of Notre Dame, University of Toronto and Utah State University, and an anonymous reviewer for helpful comments on an earlier draft. We are particularly indebted to University of Notre Dame Research Analyst Hang Li. We gratefully acknowledge the contribution of Thomson Financial for providing earnings per share forecast data, available through the Institutional Brokers Estimate System. These data have been provided as part of a broad academic program to encourage earnings expectations research. AboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinkedInRedditWechat ABSTRACT We provide evidence that the shapes (particularly around zero) of the frequency distributions of earnings metrics examined in the extant earnings management literature are affected by (1) deflation (using, for example, price or market capitalization), (2) sample selection criteria that lead to differential inclusion/exclusion of observations to the left of zero versus observations to the right of zero (implicit in studies focusing on firms followed by I/B/E/S and explicit in studies partitioning on a variable differing between loss observations and profit observations), (3) differences between the characteristics of observations to the left of zero and observations to the right of zero (such as market pricing and analyst optimism/pessimism), or (4) a combination of these factors. Since the shapes of the frequency distributions of earnings metrics at zero are likely due to one of the above effects, we conclude that the shapes cannot be used as ipso facto evidence of earnings management. Citing Literature Volume43, Issue4September 2005Pages 557-592 RelatedInformation
Publication Year: 2005
Publication Date: 2005-09-01
Language: en
Type: article
Indexed In: ['crossref']
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Cited By Count: 398
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