Classification Shifting in the Income-Decreasing Discretionary Accrual Firms

Humeyra Adiguzel

International Journal of Financial Research, 2017, vol. 8, issue 3, 187-194

Abstract: This study investigates whether managers use classification shifting to classify operating expenses as non-operating. Using a methodology similar to McVay (2006), I find no evidence of classification shifting between operating and non-operating expenses. However, I find evidence that managers classify operating expenses as non-operating in the absence of income decreasing accrual management. This finding can be explained that income-decreasing accrual management both affects operating and non-operating expenses and measuring classification shifting without considering discretionary accrual management produces meaningless results.

Keywords: classification shifting; non-operating expenses; income-decreasing accrual management (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:jfr:ijfr11:v:8:y:2017:i:3:p:187-194

DOI: 10.5430/ijfr.v8n3p187

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