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Are Unmanaged Earnings Always Better for Shareholders?

Author

Listed:
  • Anil Arya
  • Shyam Sunder
  • Jonathan Glover

Abstract

The push for increased transparency in financial reporting and corporate governance serves shareholders only up to a limit. The problem of assessing the value of transparency to shareholders is subtle because both the level and pattern of earnings can convey information. Even when earnings management conceals information, it can be beneficial to shareholders. Distinguishing between ex ante and ex post efficiency underscores the advantages of achieving a balance between transparency and privacy in corporations.

Suggested Citation

  • Anil Arya & Shyam Sunder & Jonathan Glover, 2002. "Are Unmanaged Earnings Always Better for Shareholders?," Yale School of Management Working Papers ysm295, Yale School of Management, revised 01 Feb 2003.
    • Handle: RePEc:ysm:wpaper:ysm295
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    File URL: https://repec.som.yale.edu/icfpub/publications/2551.pdf
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    References listed on IDEAS

    as
    1. Joel S. Demski, 1998. "Performance Measure Manipulation," Contemporary Accounting Research, John Wiley & Sons, vol. 15(3), pages 261-285, September.
    2. Arya, A. & Glover, J., 1999. "Aggregate Performance Measures as a Response to One-Side Error Correction," GSIA Working Papers 1999-21, Carnegie Mellon University, Tepper School of Business.
    3. Jacques Crémer, 1995. "Arm's Length Relationships," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(2), pages 275-295.
    4. Demski, JS & Frimor, H, 1999. "Performance measure garbling under renegotiation in multiperiod agencies," Journal of Accounting Research, Wiley Blackwell, vol. 37, pages 187-214.
    5. Jonathan C. Glover & Anil Arya & Shyam NMI Sunder, 1999. "Earnings Management and the Revelation Principle," Yale School of Management Working Papers ysm120, Yale School of Management.
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    Keywords

    Earnings Management;

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