Behavioral Studies of the Effects of Regulation on Earnings Management and Accounting Choice

ACCOUNTING, ORGANIZATIONS, AND INSTITUTIONS: ESSAYS FOR ANTHONY HOPWOOD, Oxford University Press, 2009

Johnson School Research Paper Series No. #16-09

40 Pages Posted: 23 Mar 2009 Last revised: 14 Apr 2009

Robert Libby

Cornell University - Samuel Curtis Johnson Graduate School of Management

Nicholas Seybert

University of Maryland - Department of Accounting & Information Assurance

Date Written: March 21, 2009

Abstract

We review recent behavioral studies of the effects of regulation on earnings management and accounting choice. Our review examines the impact of financial reporting, auditing, and other corporate governance regulations on the beliefs and choices of managers, auditors and corporate directors. Behavioral studies contribute to the broader literature by shedding light on potential unintended consequences and overall efficacy of proposed regulations, revealing the roles of specific actors and the motives behind reporting choices, and demonstrating what determines managers' preferences for different earnings management methods (both real and accruals based). We also discuss areas that have received less attention that provide promising avenues for future behavioral research involving regulation, earnings management, and accounting choice.

Keywords: earnings management, accounting choice, financial reporting, regulation, corporate governance, auditing

JEL Classification: M41, M43, M49, G34, G38

Suggested Citation

Libby, Robert and Seybert, Nicholas, Behavioral Studies of the Effects of Regulation on Earnings Management and Accounting Choice (March 21, 2009). ACCOUNTING, ORGANIZATIONS, AND INSTITUTIONS: ESSAYS FOR ANTHONY HOPWOOD, Oxford University Press, 2009; Johnson School Research Paper Series No. #16-09. Available at SSRN: https://ssrn.com/abstract=1366425

Robert Libby (Contact Author)

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Ithaca, NY 14853
United States
607-255-3348 (Phone)
607-254-4590 (Fax)

Nicholas Seybert

University of Maryland - Department of Accounting & Information Assurance ( email )

Robert H. Smith School of Business
College Park, MD 20742-9157
United States

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