Journal article
Horizon-Induced Optimism as a Gateway to Earnings Management
Contemporary accounting research, Vol.35(1), pp.7-30
03/01/2018
DOI: 10.1111/1911-3846.12388
Abstract
Recent work in accounting suggests that managerial optimism can lead managers to escalate income-increasing earnings management. In this paper, I examine how a fundamental attribute of the earnings management settingthe amount of time between the earnings management decision and the future reversalserves as one potential source of managerial optimism. I conduct two experiments to test whether the amount of time between the earnings management decision and the future reversal systematically induces optimism that increases participants' propensity to engage in behavior that is analogous to accruals-based earnings management and to real earnings management, holding constant incentives, agency frictions, and the information environment. My results indicate that, independent of their innate optimism, the time between the earnings management decision and the future reversal likely encourages managers to overestimate their ability to compensate for current-period earnings management through strong future performance. This optimism, in turn, likely increases managers' propensity to engage in both forms of earnings management.
Details
- Title: Subtitle
- Horizon-Induced Optimism as a Gateway to Earnings Management
- Creators
- H. Scott Asay - University of Iowa
- Resource Type
- Journal article
- Publication Details
- Contemporary accounting research, Vol.35(1), pp.7-30
- Publisher
- Wiley
- DOI
- 10.1111/1911-3846.12388
- ISSN
- 0823-9150
- eISSN
- 1911-3846
- Number of pages
- 24
- Grant note
- Samuel Curtis Johnson Graduate School of Management at Cornell University Deloitte Foundation University of Iowa
- Language
- English
- Date published
- 03/01/2018
- Academic Unit
- Accounting
- Record Identifier
- 9984380390102771
Metrics
1 Record Views