Market valuation and earnings manipulation
This paper examines a popular belief that managers of high valuation companies have a stronger incentive to manipulate future earnings than low valuation companies. Using U.S. data from 1988 to 2004 as our sample, we find the belief only half true. A positive relationship between valuation and future discretionary accruals only exists for companies receiving limited attention. For companies included in the Standard & Poor’s 1500 index, there is no such a relationship. As for the motivation of manipulation, the evidence suggests that it is used to increase the proceeds received from seasoned equity offerings; it is not used to facilitate executives to sell their personal stocks. Also, we do not find any evidence to support the claim that high valuation companies with a stronger equity-based compensation will manipulate more. On the contrary, there is weak evidence that high valuation companies with good governance will be less aggressive in using accruals.
Valuation Earnings manipulation Discretionary accrual Seasoned equity offering Governance, Compensation
Shing-yang Hu* Yueh-hsiang Lin
National Taiwan University Takming College
国际会议
西安
英文
2006-07-17（万方平台首次上网日期，不代表论文的发表时间）