Gross profit manipulation through classification shifting

Sakina H. Poonawala and Neerav Nagar

Journal of Business Research, 2019, vol. 94, issue C, 81-88

Abstract: The existing research on classification shifting has examined the manipulation of core earnings through shifting of core expenses to special items keeping the GAAP earnings constant. We examine the manipulation of gross profits through shifting of costs of goods sold to operating expenses keeping core earnings constant. We find that managers, on average, misclassify costs of goods sold as operating expenses in order to just meet prior period's gross margin. We also find that managers shift costs of goods sold to both selling, general and administrative expenses and research and development expenses. However, they are more likely to shift costs of goods sold to the latter.

Keywords: Gross profits; Classification shifting; Earnings manipulation; Operating expenses; R&D; SG&A (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0148296318304636
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:94:y:2019:i:c:p:81-88

DOI: 10.1016/j.jbusres.2018.09.013

Access Statistics for this article

Journal of Business Research is currently edited by A. G. Woodside

More articles in Journal of Business Research from Elsevier
Bibliographic data for series maintained by Catherine Liu ().