A Synthesis and Analysis of Models Measuring Accrual Based and Real Activities Earnings Management

Chapter 3 in: Earnings Management: Global Perspectives, Performance and Future Research, Published by Nova Science Publishers, Inc., 2016

Posted: 7 Apr 2016 Last revised: 4 Oct 2016

See all articles by Anna-Fani Constantatos

Anna-Fani Constantatos

University of Stirling - Department of Accounting and Finance

Dionysia Dionysiou

University of Stirling

Ioannis Tsalavoutas

University of Glasgow - Accounting and Finance Group

Date Written: March 25, 2016

Abstract

This chapter provides a description of the nowadays most commonly used methods for measuring earnings management in the accounting and finance literature. First, it covers the most important and commonly used models of accrual based earnings management (i.e., Jones, 1991; Dechow et al., 1995; Teoh et al., 1998 a, b; DeFond and Park, 2001; Dechow and Dichev, 2002; Larcker and Richardson, 2004; Kothari et al., 2005 and Dechow et al., 2012). In sequence, it describes the most important and commonly used models that examine real activities earnings management (Roychowdhury, 2006; Gunny, 2010). Finally, the chapter summarises briefly the most common determinants and motives for earnings management. On that basis, this chapter provides a practical guidance on how scholars can apply earnings management models, after considering their advantages and disadvantages. It also considers the suggested solutions offered in the literature, which aim to overcome problems in their implementation.

Keywords: earnings managements, discretionary and non-discretionary accruals, real operating activities

JEL Classification: M41

Suggested Citation

Constantatos, Anna-Fani and Dionysiou, Dionysia and Tsalavoutas, Ioannis, A Synthesis and Analysis of Models Measuring Accrual Based and Real Activities Earnings Management (March 25, 2016). Chapter 3 in: Earnings Management: Global Perspectives, Performance and Future Research, Published by Nova Science Publishers, Inc., 2016, Available at SSRN: https://ssrn.com/abstract=2759278

Anna-Fani Constantatos

University of Stirling - Department of Accounting and Finance ( email )

Stirling, Scotland FK9 4LA
United Kingdom

Dionysia Dionysiou (Contact Author)

University of Stirling ( email )

Accounting and Finance Division
Stirling, FK9 4LA
United Kingdom

Ioannis Tsalavoutas

University of Glasgow - Accounting and Finance Group ( email )

Glasgow, Scotland G12 8QQ
United Kingdom

HOME PAGE: http://www.gla.ac.uk/schools/business/staff/yannistsalavoutas/

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