Geographic Dispersion and Earnings Management

29 Pages Posted: 17 Mar 2016 Last revised: 18 Mar 2016

See all articles by Guifeng Shi

Guifeng Shi

Shanghai Jiao Tong University (SJTU)

Jianfei Sun

Shanghai Jiao Tong University - Antai College of Economics and Management

Rui Luo

University of International Business and Economics (UIBE) - School of International Trade and Economics

Date Written: December 15, 2014

Abstract

Using a sample of U.S. listed firms in the period from 1994 to 2011, we examine how the geographic dispersion of a firm affects the earnings management’s choice between accrual based management and real activities management. We show that geographically dispersed firms have lower accrual based management but higher real earnings management, when compared to geographically concentrated firms. These patterns remain robust to various proxies for geographic dispersion and are not likely to be driven by the firm’s endogenous choice. We further show that our results are consistent with the investor recognition explanation as in Merton (1987) and Garcia and Norli (2012).

Keywords: Geographic dispersion; Accrual-based earnings management; real activities earnings management

JEL Classification: M41

Suggested Citation

Shi, Guifeng and Sun, Jianfei and Luo, Rui, Geographic Dispersion and Earnings Management (December 15, 2014). Journal of Accounting and Public Policy, Vol. 34, No. 5, 2015, Available at SSRN: https://ssrn.com/abstract=2748592

Guifeng Shi

Shanghai Jiao Tong University (SJTU) ( email )

Antai College of Economics and Management
Shanghai 200052
China

Jianfei Sun (Contact Author)

Shanghai Jiao Tong University - Antai College of Economics and Management ( email )

1954 Huashan Road
Shanghai, Shanghai 200030
China
86 21 52301597 (Phone)

Rui Luo

University of International Business and Economics (UIBE) - School of International Trade and Economics ( email )

10 East Huixin Street
Chaouang District
Beijing, 100029
China

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