Testing Earning Management

Dennis Fok and Philip Hans Franses

No EI 2009-31, Econometric Institute Research Papers from Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute

Abstract: Earnings management to avoid earnings decreases and losses implies that the time series properties of the last quarter in the fiscal year differ from those of the other three quarters. We propose a simple parametric methodology to diagnose such differences. Application to a random sample of 390 firms in the Compustat database gives strong evidence of earnings management.

Keywords: earnings management; periodic time series models (search for similar items in EconPapers)
JEL-codes: M41 (search for similar items in EconPapers)
Date: 2009-11-26
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Journal Article: Testing earnings management (2013)
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