Gerakos, Joseph; Kovrijnykh, Andrei - In: Journal of Accounting and Economics 56 (2013) 1, pp. 57-72
We propose a parsimonious stochastic model of reported earnings that links misreporting to performance shocks. Our main analytical prediction is that misreporting leads to a negative second-order autocorrelation in the residuals from a regression of current earnings on lagged earnings. We also...