Accounting Choices: Variation in Managerial Opportunism

32 Pages Posted: 15 Dec 2002

See all articles by Frank Heflin

Frank Heflin

University of Georgia - J.M. Tull School of Accounting

Sung S. Kwon

Rutgers Business School - Camden

John J. Wild

University of Wisconsin - Madison - Department of Accounting and Information Systems

Abstract

This study focuses on variation in managers' accounting choices given motivations to use accounting accruals opportunistically. Prior research identifies a number of motivations arising from accounting-based contracts that encourage opportunistic reporting by managers. However, prior research implicitly assumes all managers respond identically to the same contractual motivations. This study identifies variation in managers' responses to contractual motivations involving accruals that is related to managers' stewardship of corporate assets. Evidence shows that modeling how managers use corporate assets enhances the explanation of their accounting choices given motivations to (a) use accruals opportunistically, and (b) to smooth income via accruals. Managers with high ratings on judicious use of corporate assets are less responsive to motivations to use accruals opportunistically, and to smooth income via accruals, than managers with low ratings. This evidence suggests that not all managers are equally opportunistic, and that modeling this factor helps explain cross-sectional differences in managers' accounting choices.

JEL Classification: M41, M43

Suggested Citation

Heflin, Frank and Kwon, Sung S. and Wild, John J., Accounting Choices: Variation in Managerial Opportunism. Available at SSRN: https://ssrn.com/abstract=333920

Frank Heflin

University of Georgia - J.M. Tull School of Accounting ( email )

Athens, GA 30602
United States
706-542-1616 (Phone)
706-542-3630 (Fax)

Sung S. Kwon (Contact Author)

Rutgers Business School - Camden ( email )

227 Penn Street
Camden, NJ 08102
United States
856-225-6652 (Phone)
856-225-6231 (Fax)

John J. Wild

University of Wisconsin - Madison - Department of Accounting and Information Systems ( email )

Wisconsin School of Business
975 University Avenue / Grainger Hall
Madison, WI 53706
United States
608-262-8122 (Phone)

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