To estimate abnormal accruals, prior research employs a wide variety of models and estimation procedures. We evaluate the performance of three representative models – modified Jones model (MJ), MJ with operating cash flows (MJOCF), and MJ with return on assets (MJROA) – and two estimation...

This study tests the relation between corporate tax avoidance and disclosure of geographic earnings for U.S. multinational companies. We find that after the adoption of Statement of Financial Accounting Standards No. 131 in 1998, firms opting to discontinue disclosure of geographic earnings in...

This study tests the relation between corporate tax avoidance and disclosure of geographic earnings for U.S. multinational companies. We find that after the adoption of Statement of Financial Accounting Standards No. 131 in 1998, firms opting to discontinue disclosure of geographic earnings in...

The purpose of our study is to further understand managerial incentives that affect the volatility of reported fiscal-year earnings. We do this by examining income smoothing based on pseudo fiscal years. For each firm, we create pseudo-year earnings using four consecutive quarters other than the...

Recent theoretical and empirical studies suggest that blockholders (shareholders with ownership ≥ 5%) exert governance through the threat of exit. Blockholders have strong incentives to gather private information and sell their shares when managers are perceived to underperform. To prevent...

Using a large hand-collected sample of all blockholders (ownership ≥ 5%) of S&P 1500 firms for the years 2002–2009, we first document significant individual blockholder effects on earnings management (accrual-based earnings management, real earnings management, and restatements). This...

In this study we examine whether the reported performance of one firm affects the discretionary reporting behavior of another firm. We do this by identifying the leader within each industry, defined as the first large announcing firm. We find that the discretionary performance of followers...

General evidence exists to indicate that managers manage earnings at three common earnings thresholds: analyst forecasts, prior period earnings, and zero earnings. We examine one market-based motivation suggested for this behavior. If managers perceive the market penalty for barely missing an...

As shown in the international business literature, the ability of controlling owners to extract private benefits is greater in countries with weaker legal institutions. In these countries, providing credible financial information could play an especially important role in reducing information...

Recent research provides evidence that the operating cash flows-to-price ratio subsumes accruals in explaining future annual returns. This suggests that the accrual anomaly is part of the overall value-glamour anomaly and does not represent the mispricing of earnings. We extend the literature by...