This paper provides a new approach to testing for accrual-based earnings management. Our approach exploits the inherent property of accrual accounting that any accrual-based earnings management in one period must reverse in another period. If the researcher has priors concerning the timing of...

This paper evaluates alternative models for detecting earnings management. The paper restricts itself to models that assume the construct being managed is discretionary accruals, since such models are commonly used in the extant accounting literature. Existing models range from simple models in...

This paper investigates the motivations for managers' decisions to overstate earnings and examines the consequences of such decisions. We examine firms subject to enforcement actions by the Securities and Exchange Commission for having violated the financial reporting requirements of the...

This study investigates firms subject to accounting enforcement actions by the Securities and Exchange Commission (SEC) for alleged violations of GAAP. We investigate: (i) the extent to which the alleged earnings manipulations can be explained by extant earnings management hypotheses; (ii) the...

This study investigates the economic consequences of the FASB's 1993 Exposure Draft requiring the expensing of employee stock options. We examine (i) a sample of firms in industries that are intensive users of employee stock options; (ii) a sample of firms in an emerging 'high-tech' industry...

We evaluate the role of sell-side analysts' long-term earnings growth forecasts in the pricing of common equity offerings. We find that, in general, sell-side analysts' long-term growth forecasts are systematically overly optimistic around equity offerings and that analysts employed by the lead...