DISCONTINUITIES IN EARNINGS DISTRIBUTIONS: EVIDENCE FROM SOUTH AFRICA

Joseph O. Akande (), Adedeji D. Gbadebo () and Ahmed O. Adekunle ()
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Joseph O. Akande: Department of Accounting Science, Walter Sisulu University, Mthatha, Eastern Cape, South Africa
Adedeji D. Gbadebo: Department of Accounting Science, Walter Sisulu University, Mthatha, Eastern Cape, South Africa
Ahmed O. Adekunle: Department of Accounting Science, Walter Sisulu University, Mthatha, Eastern Cape, South Africa

Oradea Journal of Business and Economics, 2023, vol. 8, issue 2, 8-22

Abstract: There is increasing evidence that earnings management amongst firms creates discontinuity in the earnings distribution. We have verified the evidence of discontinuity in earnings distribution for 246 Johannesburg Securities Exchange listed firms from 2003 to 2018. The assets-scaled income was used as earnings measure to present the empirical histograms; the standardized difference test of significance was utilized to establish the existence of discontinuities at zero. The result shows discontinuities in distributions for earnings level and earnings-change. In addition, except for the unscaled earnings, the evidence supposes that the sample design does not explain the discontinuity in the earnings (earnings change) distributions.

Keywords: earnings management; earnings discontinuity; standardized difference test; empirical histograms. (search for similar items in EconPapers)
JEL-codes: G14 G30 M40 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:ora:jrojbe:v:8:y:2023:i:2:p:8-22

DOI: 10.47535/1991ojbe169

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