The Balance Sheet as an Earnings Management Constraint
The Balance Sheet as an Earnings Management Constraint
Author(s):
Year: 2002
Paper Number:
GBS-ACC-2002-001
Goizueta Department:
Accounting
Full text available as: |
Abstract
The balance sheet accumulates the effects of previous accounting choices, so the level of net assets partly reflects the extent of previous earnings management. We predict that managers' ability to optimistically bias earnings decreases with the extent to which the balance sheet overstates net assets relative to a neutral application of GAAP. To test this prediction, we examine the likelihood of reporting various earnings surprises for 3,649 firms during 1993-1999. Consistent with our prediction, we find that the likelihood of reporting larger positive or smaller negative earnings surprises decreases with our proxy for overstated net asset values.
| Keywords: | articulation between income statement and balance sheet, earnings management constraints, measurement and recognition guidance, earnings surprises, analysts' forecasts |
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| Subjects: | Business > Accounting |
| Notes: | Registration required to access free, full-text papers. jan_barton@bus.emory.edu Emory University - Department of Accounting Goizueta Business School 1300 Clifton Road Atlanta , GA 30322 United States 404-727-6398 (Phone) 404-727-6313 (Fax) |
| Deposited On: | 03 August 2005 |
| Alternative Locations: | http://papers.ssrn.com/sol3/papers.cfm?abstract_id=320641 |
