Accounting Standards, Goodwill Impairment and Earnings Management in Malaysia

On the Relation between Conservatism in Accounting Standards and Incentives for Earnings Management

This paper studies the role of conservative accounting standards in alleviating rational yet dysfunctional unobservable earnings manipulation. We show that when accounting numbers serve both the valuation role (in which potential investors use accounting reports to assess a firm’s expected future payoff) and the stewardship role (in which current shareholders rely on the same reports to monitor...

Accounting based regulation and earnings management

We document the distortionary effects of accounting-based regulation on reported earnings. In India only firms with negative book value of equity (networth) can seek bankruptcy protection. Using a novel dataset of bankrupt firms from India, we show that firms manage earnings downward to seek bankruptcy protection. Strengthening creditor rights reduces downward earnings management among non-grou...

Has Goodwill Accounting Gone Bad?

Earnings management and participation in accounting standard-setting

Recent economic and political science research suggests that the way public policy is set, and in particular the participation of those affected by it, impacts upon the outcome of the policy. Accounting standard setting has long offered such a possibility to participate via the due process approach followed by major standard setters. We review the literature on areas close to financial reportin...

The Choice between Real and Accounting Earnings Management

This study develops a theoretical model and presents empirical evidence on crosssectional variation in managers’ choice of AEM and REM. In particular, it studies how AEM and REM are jointly affected by firms’ growth prospects, managers’ market-based compensation incentives, and the cost of real earnings management. The model yields several testable hypotheses. First, when the firm’s growth pros...