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Earnings Management to Exceed the Threshold: A Comparative Analysis of Consolidated and Parent-only Earnings

Author

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  • Akinobu Shuto

    (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)

Abstract

This paper examines whether consolidated earnings are managed to a greater extent than parent-only earnings or vice versa in an attempt to exceed the threshold in Japanese firms. The analysis reveals that earnings management to avoid earnings decreases is more pronounced in parent-only earnings for the period 1980-1999. Further, it reveals that the management of parent-only earnings has been less pervasive following the introduction of the new consolidated reporting system in March 2000. In addition, this paper provides evidence suggesting that earnings management in consolidated earnings increased after March 2000. These results indicate the possibility that the new consolidated reporting system and principles reduce the incentive to manage parent-only earnings and increase that to manage consolidated earnings.

Suggested Citation

  • Akinobu Shuto, 2005. "Earnings Management to Exceed the Threshold: A Comparative Analysis of Consolidated and Parent-only Earnings," Discussion Paper Series 224, Research Institute for Economics & Business Administration, Kobe University, revised Jul 2008.
    • Handle: RePEc:kob:dpaper:224
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    Cited by:

    1. Keishi Fujiyama & Makoto Kuroki, 2017. "Strategic Management Forecasts and Accounting Choices: A Case of Employee Downsizing in Japan," Discussion Paper Series DP2017-06, Research Institute for Economics & Business Administration, Kobe University, revised Sep 2017.
    2. Kim, Hyonok & Wilcox, James A. & Yasuda, Yukihiro & 安田, 行宏, 2020. "Internal and External Lending by Nonfinancial Businesses," Working Paper Series G-1-23, Hitotsubashi University Center for Financial Research.
    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. Yim, Andrew, 2013. "Mixture and Continuous 'Discontinuity' Hypotheses: An Earnings Management Model with Auditor-Required Adjustment," MPRA Paper 44702, University Library of Munich, Germany.
    5. Akinobu Shuto & Takuya Iwasaki, 2013. "The Effect of Institutional Factors on Discontinuities in Earnings Distribution: Public Versus Private Firms in Japan," Discussion Paper Series DP2013-32, Research Institute for Economics & Business Administration, Kobe University, revised Jul 2014.
    6. Chen, Shaw K. & Lin, Bing-Xuan & Wang, Yaping & Wu, Liansheng, 2010. "The frequency and magnitude of earnings management: Time-series and multi-threshold comparisons," International Review of Economics & Finance, Elsevier, vol. 19(4), pages 671-685, October.
    7. Kim, Hyonok & Yasuda, Yukihiro & 安田, 行宏, 2020. "Earnings Management and Stock Market Listing," Working Paper Series G-1-24, Hitotsubashi University Center for Financial Research.

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    More about this item

    Keywords

    Earnings management; Earnings distribution; Accounting regulation; Consolidated earnings; Parent-only earnings;
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