Earnings Management? The Shapes of the Frequency Distributions of Earnings Metrics Are Not Evidence Ipso Facto

By Cindy Durtschi, Peter D. Easton. 2005

376 citations recorded by the source corpus.

Subfields: Accounting, Finance, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/46156bb254f220c1520d91c29fad5d5a83857246

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In Accounting

1. John (Xuefeng) Jiang
2. G. He
3. Jeong‐Bon Kim
4. Weili Ge
5. John R. Graham
6. Terry Shevlin
7. David J. Denis
8. Campbell R. Harvey

In Finance

1. John (Xuefeng) Jiang
2. David J. Denis
3. Campbell R. Harvey
4. John R. Graham
5. Ilia D. Dichev
6. L. Naveen
7. Weili Ge
8. Catherine Schrand

In Strategy and Management

1. John R. Graham
2. David J. Denis
3. John (Xuefeng) Jiang
4. Weili Ge
5. Clive Lennox
6. Xi Wu
7. Campbell R. Harvey
8. Sarah E. McVay

Citations in the corpus

• An alternative interpretation of the discontinuity in earnings distributions (2007, critical): “Thus, contrary to the assertions in Durtschi and Easton (2005), market value deflation does not induce a spurious discontinuity at zero, but share deflation substantially distorts the frequency distribution of earnings in this region.”
• Earnings quality: Evidence from the field (2013, background): “, discretionary accruals and benchmark beating) is disputed by papers that argue that such representation of managed earnings represents (i) either an econometric or data artifact (Guay et al., 1996; Durtschi and Easton, 2005); or (ii) some unobservable dimension of earnings quality related to the u”
• Non-audit Services and Audit Quality: Evidence from Private Firms (2013, background): “Several authors have doubted the ability of Jones models to accurately measure earnings management (Guay et al., 1996; Durtschi and Easton, 2005; Kothari et al., 2005).”
• CEO and CFO Career Penalties to Missing Quarterly Analysts Forecasts (2012, critical): “2 Durtschi and Easton (2005) contest these findings and suggest the discontinuity is not due to earnings management, but is rather due to the differential magnitude of forecast errors when analysts are optimistic versus pessimistic.”
• More Evidence of Bias in the Differential Timeliness Measure of Conditional Conservatism (2011, positive): “For example, the results in Durtschi and Easton (2009) can be characterized as explaining how combining distributions of price-deflated”
• Management of Earnings and Analysts' Forecasts to Achieve Zero and Small Positive Earnings Surprises (2006, neutral): “13 Durtschi and Easton (2005) contend that deflating earnings by market capitalization can induce particular difficulties in interpreting any discontinuity in the distribution of earnings at zero as evidence of earnings management.”
• Understanding Earnings Quality: A Review of the Proxies, Their Determinants and Their Consequences (2010, background): “…loss firms; Beaver et al. (2007), who suggest that the ‘‘kink’’ in earnings around zero can be explained by asymmetric taxes, rather than opportunistic choices; and Durtschi and Easton (2005, 2009), who show that it is explained by statistical and sample bias issues related to scaling by price.”
• The Quality of Analysts ’ Cash Flow Forecasts (2008, neutral): “21 See Beaver, McNichols and Nelson (2004), Dechow, Richardson and Tuna (2003), Durtschi and Easton (2005) and Jacob and Jorgensen (2007).”
• Do Firms Manage Earnings to Meet Dividend Thresholds (2008, positive): “…Burgstahler and Dichev (1997), we first compute the difference between reported earnings before extraordinary items and dividends for the sample of payers.18 We scale the difference by the number of shares (see Durtschi and Easton, 2005 for a discussion of the merits of different scaling measures).”
• Asymmetric timeliness tests of accounting conservatism (2007, neutral): “This choice of deflator results in the right-skewed (unscaled) earnings distribution becoming left-skewed after deflation (for greater discussion, see Durtschi & Easton, 2005 ), and in conditions similar to those in our Panel C of Fig. 3, which can lead to the ST and SVR biases providing evidence c”
• Trading incentives to meet the analyst forecast (2006, background): “…(Ayers, Jiang, & Yeung, 2006; Beaver, McNichols, & Nelson, 2003; Bhojraj, Hribar, & Picconi, 2003; Dechow, Richardson, & Tuna, 2000; Dechow, Richardson, & Tuna, 2003; Durtschi & Easton, 2005; Ke, 2004; Phillips, Pincus, & Rego, 2003).2 Our study also adds to the insider trading literature.”