Employee turnover likelihood and earnings management: evidence from the inevitable disclosure doctrine

Huasheng Gao, Huai Zhang () and Jin Zhang ()
Additional contact information
Huai Zhang: Nanyang Technological University
Jin Zhang: Monash University

Review of Accounting Studies, 2018, vol. 23, issue 4, No 6, 1424-1470

Abstract: Abstract We present evidence that managers consider employee turnover likelihood in their accounting choices. Our tests exploit U.S. state courts’ staggered recognition of the inevitable disclosure doctrine (IDD), which reduces employees’ ability to switch employers. We find a significant decrease in upward earnings management for firms headquartered in states that recognize the IDD, relative to firms headquartered elsewhere. The effect of the IDD is stronger for firms relying more on human capital and for firms whose employees have higher ex-ante turnover likelihood, confirming the employee retention channel. Overall, our results support the view that retaining employees is an important motive for corporate earnings management.

Keywords: Earnings management; Employee turnover likelihood; Inevitable disclosure doctrine (search for similar items in EconPapers)
JEL-codes: J01 M41 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

Downloads: (external link)
http://link.springer.com/10.1007/s11142-018-9475-x Abstract (text/html)
Access to the full text of the articles in this series is restricted.

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:spr:reaccs:v:23:y:2018:i:4:d:10.1007_s11142-018-9475-x

Ordering information: This journal article can be ordered from
http://www.springer.com/accounting/journal/11142

DOI: 10.1007/s11142-018-9475-x

Access Statistics for this article

Review of Accounting Studies is currently edited by Paul Fischer

More articles in Review of Accounting Studies from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().