This study examines the ability of revenue and accrual models to detect simulated and actual earnings management. The results indicate that revenue models are less biased, better specified, and more powerful than commonly used accrual models. Using a simulation procedure, I find that revenue...

Managerial behavior differs considerably when managers report quarterly profits versus losses. When they report profits, managers seek to just meet or slightly beat analyst estimates. When they report losses, managers do not attempt to meet or slightly beat analyst estimates. Instead, managers...

This paper examines the implications of using the absolute value of discretionary accruals when testing for earnings management. First, we analytically develop the mean and variance of the distribution of absolute discretionary accruals, and show that the expected value is an increasing function...

I document a recent increase in the usefulness of quarterly earnings announcements. I measure the usefulness of earnings announcements as the percentage of total annual excess returns that occurs on or around quarterly earnings announcements. In the main sample, approximately 18.4% of...

Under the assumption that audit quality relates positively to unobservable financial reporting reliability, we investigate whether audit quality is associated with the predictability of accounting earnings by focusing on analyst earnings forecast properties. The evidence shows that analysts'...

Prior research has documented a "kink" in the earnings distribution: too few firms report small losses, too many firms report small profits. We investigate whether boosting of discretionary accruals to report a small profit is a reasonable explanation for this "kink". Overall, we are unable to...

Our paper examines the association between components of analysts' earnings surprises and future earnings. We decompose the analysts' earnings surprise into its revenue, pretax margin, pretax income, and tax components. After controlling for current period earnings and discretionary accruals, we...

Crowdsourcing — when a task normally performed by employees is outsourced to a large network of people via an open call — is making inroads into the investment research industry. We shed light on this new phenomenon by examining the value of crowdsourced earnings forecasts. Our sample...

We investigate if high-ability managers are more likely to intentionally smooth earnings, a form of earnings management, and when they are more likely to do so. Although prior studies provide evidence that high-ability managers report higher quality earnings, the literature does not indicate...

This paper independently replicates the results of the survey of experienced financial managers reported in section 4 of Libby and Rennekamp (2012). Using the same questions as Libby and Rennekamp (2012), we survey 110 experienced managers to examine their beliefs about the relationship between...