Detecting overproduction: Evidence from inventory write‐down

Fernando Comiran and Subprasiri Siriviriyakul

Accounting and Finance, 2023, vol. 63, issue 3, 3351-3386

Abstract: We use inventory write‐downs to differentiate opportunistic and non‐opportunistic overproduction measures. We posit that non‐opportunistic overproduction is positively associated with future write‐downs because overproduction generally leads to excess inventory, while opportunistic overproduction (to inflate earnings) is negatively associated with write‐downs because write‐downs decrease earnings. We find that change‐based proxies (deviations from past behaviour) are positively associated with the likelihood of future write‐downs, whereas residual‐based proxies (deviations from industry norms) are negatively associated with this likelihood, suggesting that the former (latter) primarily capture non‐opportunistic (opportunistic) overproduction. Our study highlights the importance of using appropriate overproduction measures for each research setting.

Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/acfi.13038

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:bla:acctfi:v:63:y:2023:i:3:p:3351-3386

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0810-5391

Access Statistics for this article

Accounting and Finance is currently edited by Robert Faff

More articles in Accounting and Finance from Accounting and Finance Association of Australia and New Zealand Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().