An Empirical Analysis of Revenue Manipulation *

This study seeks to examine the determinants of revenue manipulation by focusing on factors that have unique implications for revenue. Based on a sample of financial restatements arising from aggressive accounting, I control for general earnings management incentives by comparing revenue restatement firms with non-revenue restatement firms. I predict and find that firms with (i) higher growth perspectives, (ii) higher operating margins, (iii) outstanding analyst sales forecasts, or (iv) higher accounting flexibility in revenue recognition are more likely to manipulate revenue as opposed to other earnings components. However, I do not find lack of value relevance of earnings significantly affects the probability of revenue manipulation. ________________ * I thank Bugra Ozel for research assistance. I am grateful to I/B/E/S for providing analyst sales forecast data. An Empirical Analysis of Revenue Manipulation