IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-00840715.html
   My bibliography  Save this paper

What should an unmanaged earnings distribution look like?

Author

Listed:
  • 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])

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.

Suggested Citation

  • Olivier Vidal, 2010. "What should an unmanaged earnings distribution look like?," Post-Print hal-00840715, HAL.
    • Handle: RePEc:hal:journl:hal-00840715
    Note: View the original document on HAL open archive server: https://hal.science/hal-00840715
    as

    Download full text from publisher

    File URL: https://hal.science/hal-00840715/document
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Cindy Durtschi & Peter Easton, 2005. "Earnings Management? The Shapes of the Frequency Distributions of Earnings Metrics Are Not Evidence Ipso Facto," Journal of Accounting Research, Wiley Blackwell, vol. 43(4), pages 557-592, September.
    2. Leuz, Christian & Nanda, Dhananjay & Wysocki, Peter D., 2003. "Earnings management and investor protection: an international comparison," Journal of Financial Economics, Elsevier, vol. 69(3), pages 505-527, September.
    3. Yves Mard, 2004. "Les sociétés françaises cotées gèrent-elles leurs chiffres comptables afin d'éviter les pertes et les baisses de résultats ?," ACCRA, Association francophone de comptabilité, vol. 10(2), pages 73-98.
    4. Burgstahler, David & Dichev, Ilia, 1997. "Earnings management to avoid earnings decreases and losses," Journal of Accounting and Economics, Elsevier, vol. 24(1), pages 99-126, December.
    5. Degeorge, Francois & Patel, Jayendu & Zeckhauser, Richard, 1999. "Earnings Management to Exceed Thresholds," The Journal of Business, University of Chicago Press, vol. 72(1), pages 1-33, January.
    6. David Holland & Alan Ramsay, 2003. "Do Australian companies manage earnings to meet simple earnings benchmarks?," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 43(1), pages 41-62, March.
    7. Roychowdhury, Sugata, 2006. "Earnings management through real activities manipulation," Journal of Accounting and Economics, Elsevier, vol. 42(3), pages 335-370, December.
    8. David C. Burgstahler & Michael J. Eames, 2003. "Earnings Management to Avoid Losses and Earnings Decreases: Are Analysts Fooled?," Contemporary Accounting Research, John Wiley & Sons, vol. 20(2), pages 253-294, June.
    9. Das, Somnath & Zhang, Huai, 2003. "Rounding-up in reported EPS, behavioral thresholds, and earnings management," Journal of Accounting and Economics, Elsevier, vol. 35(1), pages 31-50, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Thomas Dilger & Sabine Graschitz, 2015. "Influencing Factors on Earnings Management, Empirical Evidence from Listed German and Austrian Companies," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Democritus University of Thrace (DUTH), Kavala Campus, Greece, vol. 8(2), pages 69-86, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Olivier Vidal, 2010. "Gestion du résultat pour évite de publier une perte : les montants manipulés sont-ils marginaux ?," Post-Print hal-00840910, HAL.
    2. Olivier Vidal, 2010. "Quelle devrait-être l'allure des distributions de résultats non manipulés ?," Post-Print hal-00594836, HAL.
    3. Olivier Vidal, 2009. "Are asymmetry measures relevant to analyze accounting thresholds? [Les Indicateurs D'Asymétrie Sont- Ils Pertinents Pour Étudier Les Seuils Comptables ?]," Post-Print hal-02104099, HAL.
    4. Dechow, Patricia & Ge, Weili & Schrand, Catherine, 2010. "Understanding earnings quality: A review of the proxies, their determinants and their consequences," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 344-401, December.
    5. Olivier Vidal, 2011. "Comment mesurer les irrégularités de distribution des résultats publiés ?," Post-Print hal-02104086, HAL.
    6. Olivier Vidal, 2009. "Les Indicateurs D'Asymétrie Sont-Ils Pertinents Pour Étudier Les Seuils Comptables ?," Post-Print halshs-00458894, HAL.
    7. Byzalov, Dmitri & Basu, Sudipta, 2019. "Modeling the determinants of meet-or-just-beat behavior in distribution discontinuity tests," Journal of Accounting and Economics, Elsevier, vol. 68(2).
    8. Jacob, John & Jorgensen, Bjorn N., 2007. "Earnings management and accounting income aggregation," Journal of Accounting and Economics, Elsevier, vol. 43(2-3), pages 369-390, July.
    9. Habib, Ahsan & Hossain, Mahmud, 2008. "Do managers manage earnings to ‘just meet or beat’ analyst forecasts?," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 17(2), pages 79-91.
    10. Burgstahler, David & Chuk, Elizabeth, 2015. "Do scaling and selection explain earnings discontinuities?," Journal of Accounting and Economics, Elsevier, vol. 60(1), pages 168-186.
    11. Olivier Vidal, 2017. "Studying Unmanaged Earnings Distributions [L'étude des distributions de résultats non manipulés]," Post-Print hal-03737349, HAL.
    12. Trimble, Madeline, 2018. "A reinvestigation into accounting quality following global IFRS adoption: Evidence via earnings distributions," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 33(C), pages 18-39.
    13. Martin Nienhaus, 2022. "Executive equity incentives and opportunistic manager behavior: new evidence from a quasi-natural experiment," Review of Accounting Studies, Springer, vol. 27(4), pages 1276-1318, December.
    14. Gilliam, Thomas A. & Heflin, Frank & Paterson, Jeffrey S., 2015. "Evidence that the zero-earnings discontinuity has disappeared," Journal of Accounting and Economics, Elsevier, vol. 60(1), pages 117-132.
    15. Olivier Vidal, 2011. "Comment mesurer les irrégularités de distribution des résultats publiés ?," Post-Print hal-00594840, HAL.
    16. Pelham Gore & Peter Pope & Ashni Singh, 2007. "Earnings management and the distribution of earnings relative to targets: UK evidence," Accounting and Business Research, Taylor & Francis Journals, vol. 37(2), pages 123-149.
    17. Chardonnens, Patrick & Fiechter, Peter & Wallmeier, Martin, 2022. "The disappearance of the zero-earnings discontinuity: SOX, dotcom boom or gradual decline?," Finance Research Letters, Elsevier, vol. 49(C).
    18. Stavros Degiannakis & George Giannopoulos & Salma Ibrahim & Ivana Rozic, 2019. "Earnings management to avoid losses and earnings declines in Croatia," International Journal of Computational Economics and Econometrics, Inderscience Enterprises Ltd, vol. 9(3), pages 219-238.
    19. Olivier Vidal, 2016. "Studying Unmanaged Earnings Distributions [L'étude des distributions de résultats non manipulés]," Post-Print hal-01902456, HAL.
    20. Holger Daske & Günther Gebhardt & Stuart McLeay, 2006. "The distribution of earnings relative to targets in the European Union," Accounting and Business Research, Taylor & Francis Journals, vol. 36(3), pages 137-167.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-00840715. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.