The Role of Disaggregated Accounting Data in Detecting and Suppressing Earnings Management

55 Pages Posted: 29 Apr 2008

See all articles by Eli Amir

Eli Amir

Tel Aviv University

Eti Einhorn

Tel Aviv University

Itay Kama

University of Michigan, Stephen M. Ross School of Business

Date Written: March 2008

Abstract

Though ample empirical evidence alludes to the importance of disaggregated accounting data in the context of earnings management, extant accounting theory considers biases in reporting earnings mostly at the aggregated level of the reported earnings. By analyzing reporting manipulations at the disaggregated level of the earnings report, this study highlights the essential role that disaggregated accounting information plays in detecting and suppressing earnings management activities. Disaggregated accounting information is shown to be especially effective in this role when it consists of components that are tightly interrelated by their fundamental economic nature and highly diverse in their sensitivity to reporting manipulations.

Keywords: Information asymmetry, Accounting, Financial reporting, Earnings management, Reporting bias, Disaggregated accounting data, Financial ratios

JEL Classification: D82, G14, M41

Suggested Citation

Amir, Eli and Einhorn, Eti and Kama, Itay, The Role of Disaggregated Accounting Data in Detecting and Suppressing Earnings Management (March 2008). Available at SSRN: https://ssrn.com/abstract=1126145 or http://dx.doi.org/10.2139/ssrn.1126145

Eli Amir

Tel Aviv University ( email )

312 Recanati Bldg.
69978 Tel Aviv
Israel
+972 3 640-8510 (Phone)
+972 3 640-7738 (Fax)

Eti Einhorn (Contact Author)

Tel Aviv University ( email )

P.O. Box 39010
Ramat Aviv, Tel Aviv, 69978
Israel

Itay Kama

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States
734-763-4538 (Phone)

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