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
Date Written: March 25, 2016
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: Suggested Citation