Market Rewards to Patterns of Increasing Earnings: Do Cash Flow Patterns, Accruals Manipulation and Real Activities Manipulation Matter?

Su-Ping Liu () and Juan Manuel García Lara ()
Additional contact information
Su-Ping Liu: Universidad Carlos III de Madrid
Juan Manuel García Lara: Universidad Carlos III de Madrid

No 1303, Working Papers from Departament Empresa, Universitat Autònoma de Barcelona

Abstract: This study explores whether firms have differential price-earnings multiples associated with their means of achieving a sequential pattern of increasing positive earnings. Our main findings show that market participan ts assign higher price-earnings multiples to firms when their pattern of increasing earnings is supported by the same pattern of increasing cash flows. Market participants assign lower price-earnings multiples to firms suspect of having engaged in accrual-based earnings management, sales manipulation, and overproduction to achieve the earnings pattern. We find, however, that market participants do not penalize firms suspect of having achieved the earnings pattern through the opportunistic reduction of disc retionary expenses.

Pages: 52 pages
Date: 2013-05, Revised 2013-05
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in Working Papers at the Department of Business, May pages 1-52

Downloads: (external link)
http://www.uab.cat/doc/DOC_WP_13_03 Revised version, 2013 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 No Encontrado (http://www.uab.cat/doc/DOC_WP_13_03 [301 Moved Permanently]--> https://www.uab.cat/doc/DOC_WP_13_03)

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:bbe:wpaper:1303

Access Statistics for this paper

More papers in Working Papers from Departament Empresa, Universitat Autònoma de Barcelona
Bibliographic data for series maintained by Departament Empresa ().