Elections and Discretionary Accruals: Evidence from 2004

By K. Ramanna, S. Roychowdhury. 2010

168 citations recorded by the source corpus.

We examine the accrual choices of outsourcing firms with links to US congressional candidates during the 2004 elections, when corporate outsourcing was a major campaign issue. We find that politically-connected firms with more extensive outsourcing activities have more income-decreasing discretionary accruals. Further, relative to adjacent periods, the evidence is concentrated in the two calendar quarters immediately preceding the 2004 election, consistent with heightened incentives for firms to manage earnings during the election season. The incentives can be attributed to donor firms' concerns about the potentially negative consequences of scrutiny over outsourcing for themselves and for their affiliated candidates.

Subfields: Accounting

View Paper: https://www.semanticscholar.org/paper/f2fb30ffca1d12151e35a38ad3ae8baa26cd70d2

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Citations in the corpus

Accrual-based and real earnings management and political connections (2015, unknown): “Recent studies that examine the differences in earnings management between politically-connected and non-connected firms, report that the presence of political connections is associated with a lower accruals quality (Riahi-Belkaoui, 2004; Chaney et al., 2011; Ramanna and Roychowdhury, 2010).”
Political Incentives to Suppress Negative Information: Evidence from Chinese Listed Firms (2015, background): “These papers, including Jones [1991] , Petroni [1992] , Han and Wang [1998] , and Ramanna and Roychowdhury [2010] , document that firms alter reported net income to either garner expected political gains or minimize expected political costs arising in their setting.”
The effect of accounting comparability on the accrual-based and real earnings management (2016, background): “|) because managers sometimes have opportunistic incentives to manage earnings downward using accruals (Jones, 1991; Ramanna and Roychowdhury, 2010).”
Auditor Choice in Politically Connected Firms (2014, unknown): “, Yu and Yu, 2011), including firms’ accounting transparency (e.g., Guay, 2010; Ramanna and Roychowdhury, 2010).”
The Real Effects of Political Uncertainty: Elections and Investment Sensitivity to Stock Prices (2010, background): “Ramanna and Roychowdhury (2009) document that firms with more extensive outsourcing activities relied more on income-decreasing discretionary accruals during the 2004 congressional elections.”