Abstract

http://ssrn.com/abstract=871215
 
 

References (2)



 
 

Citations (32)



 


 



Value Destruction and Financial Reporting Decisions


John R. Graham


Duke University; NBER

Campbell R. Harvey


Duke University - Fuqua School of Business; National Bureau of Economic Research (NBER)

Shivaram Rajgopal


Emory University - Goizueta Business School

September 6, 2006


Abstract:     
We recently conducted a comprehensive survey that analyzes how senior financial executives make decisions related to performance measurement and voluntary disclosure. In particular, we ask CFOs what earnings benchmarks they care about and which factors motivate executives to exercise discretion, and even sacrifice economic value, to deliver earnings. These issues are crucially linked to stock market performance. Much of the media attention is focused on a small number of high profile firms that have engaged in earnings fraud. Our results show that the destruction of shareholder value through legal means is pervasive, if not a routine way of doing business. Indeed, we assert that the amount of value destroyed by firms striving to hit earnings targets exceeds the value lost in these high profile fraud cases.

Number of Pages in PDF File: 23

Keywords: Earnings management, earnings smoothing, consensus earnings, meeting benchmarks, value destruction, agency problems, real earnings management, unexpected earnings, earnings surprise, net present value

JEL Classification: G14, G30, G32, M41, M43, M49, G38

working papers series


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Date posted: December 20, 2005  

Suggested Citation

Graham, John R. and Harvey, Campbell R. and Rajgopal, Shivaram, Value Destruction and Financial Reporting Decisions (September 6, 2006). Available at SSRN: http://ssrn.com/abstract=871215 or http://dx.doi.org/10.2139/ssrn.871215

Contact Information

John Robert Graham
Duke University ( email )
Box 90120
Durham, NC 27708-0120
United States
919-660-7857 (Phone)
919-660-8030 (Fax)
NBER
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Campbell R. Harvey
Duke University - Fuqua School of Business ( email )
Box 90120
Durham, NC 27708-0120
United States
919-660-7768 (Phone)
919-660-8030 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Shivaram Rajgopal (Contact Author)
Emory University - Goizueta Business School ( email )
1300 Clifton Road
Atlanta, GA 30322-2722
United States
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