What should an unmanaged earnings distribution look like?

Olivier Vidal ()
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Olivier Vidal: GREG - CRC - Groupe de recherche en économie et en gestion - Centre de recherche en comptabilité - CNAM - Conservatoire National des Arts et Métiers [CNAM]

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Abstract: In asserting that the number of firms reporting small profits is abnormally high, thus suggesting that earnings management has taken place, accounting researchers assume that the distribution of reported earnings should be smooth for unmanaged earnings. This has never in fact been demonstrated. This article seeks to confirm this assumption through a laboratory experiment, and also sets out to identify the general distribution pattern to be expected for unmanaged earnings. Normal distribution does not appear to be a good fit. The study's results also highlight the existence of downward management of earnings by firms with higher-than-average profits.

Keywords: Earnings management; earnings distribution; experiment; accounting threshold (search for similar items in EconPapers)
Date: 2010
Note: View the original document on HAL open archive server: https://hal.science/hal-00840715
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Published in The Euro-Mediterranean Economics and Finance Review, 2010, 5 (2), pp.141-162

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