Comparing Abnormal Accruals Estimates Across Samples: An International Test

Posted: 30 Oct 2012

See all articles by Erik Peek

Erik Peek

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM); Erasmus Research Institute of Management (ERIM)

Roger Meuwissen

Maastricht Accounting and Auditing Research and Education Center (MARC)

Frank Moers

Maastricht University School of Business and Economics; European Centre for Corporate Engagement (ECCE)

Ann Vanstraelen

Maastricht Accounting and Auditing Research and Education Center (MARC); Maastricht University

Date Written: October 29, 2012

Abstract

This study examines whether accruals models’ performance, in terms of predictive accuracy and power to detect earnings management, varies across strongly heterogeneous samples, such as different countries. We analyze the performance of two accruals estimation models, i.e., the Modified Jones model and the Dechow-Dichev model. Using accounting data from nine countries for the period 1989 to 2009, we find that the models exhibit considerable cross-country performance variation and, more importantly, that this variation is systematic. We empirically establish that the international variation in sales growth persistence, accounting practices, and sample size explains a significant proportion of the cross-country performance variation, highlighting a potential inference problem in across-samples comparisons.

Keywords: abnormal accruals models, earnings management detection, predictive accuracy, international accounting

Suggested Citation

Peek, Erik and Meuwissen, Roger and Moers, Frank and Vanstraelen, Ann, Comparing Abnormal Accruals Estimates Across Samples: An International Test (October 29, 2012). European Accounting Review, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2168098

Erik Peek (Contact Author)

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM) ( email )

Burg Oudlaan 50
Room T08-53
3062 PA Rotterdam, 3062 PA
Netherlands

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Roger Meuwissen

Maastricht Accounting and Auditing Research and Education Center (MARC) ( email )

Frank Moers

Maastricht University School of Business and Economics ( email )

Maastricht

HOME PAGE: http://www.maastrichtuniversity.nl/sbe

European Centre for Corporate Engagement (ECCE) ( email )

Tongersestraat 53
Maastricht, 6211LM
Netherlands

Ann Vanstraelen

Maastricht Accounting and Auditing Research and Education Center (MARC) ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands

Maastricht University ( email )

P.O. Box 616
Maastricht, 6200MD
Netherlands

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