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Earnings management practices among growth and value firms

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  • Pawan Madhogarhia
  • Ninon Sutton
  • Theodor Kohers

Abstract

This research examines the earnings management practices of growth versus value firms. We predict that growth firms have more incentive to 'manage their earnings' and that they do so more aggressively as compared to value firms. The primary reason for this behaviour is that information asymmetries are more severe for growth firms. Using a sample of firms over the period from 1997 through 2001, this study finds that growth firms tend to manage their earnings upward and downward more aggressively than value firms. These results are robust to using different components of discretionary total accruals as a measure for earnings management and after controlling for other factors.

Suggested Citation

  • Pawan Madhogarhia & Ninon Sutton & Theodor Kohers, 2009. "Earnings management practices among growth and value firms," Applied Financial Economics, Taylor & Francis Journals, vol. 19(22), pages 1767-1778.
    • Handle: RePEc:taf:apfiec:v:19:y:2009:i:22:p:1767-1778
    DOI: 10.1080/09603100903018745
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