Discussion of the Effect of Earnings Management on the Asymmetric Timeliness of Earnings

30 Pages Posted: 28 Apr 2005

See all articles by Juan M. García Lara

Juan M. García Lara

Universidad Carlos III de Madrid - Department of Business Administration

Beatriz Garcia Osma

Universidad Carlos III de Madrid - Department of Business Administration

Araceli Mora

University of Valencia - Department of Accounting

Abstract

Is earnings management affecting (driving) the measures of earnings conservatism? Ball et al. (2000) point out that the asymmetry in the recognition of good and bad news in earnings (faster recognition of bad news: earnings conservatism) is more pronounced in common-law than in code-law based accounting regimes. However, comparative studies on earnings conservatism in Europe have failed to identify significant differences between common-law and code-law based countries. We argue that in code-law based countries managers have incentives to reduce earnings consistently. This enhances the association between earnings and returns in bad news periods. We find that after controlling for discretionary accruals, the differential earnings response to bad news in Germany and France decreases significantly.

Suggested Citation

García Lara, Juan Manuel and Garcia Osma, Beatriz and Mora, Araceli, Discussion of the Effect of Earnings Management on the Asymmetric Timeliness of Earnings. Journal of Business Finance & Accounting, Vol. 32, No. 3-4, pp. 691-726, April 2005. Available at SSRN: https://ssrn.com/abstract=708665

Juan Manuel García Lara (Contact Author)

Universidad Carlos III de Madrid - Department of Business Administration ( email )

Calle Madrid 126
Getafe, Madrid, Madrid 28903
Spain

Beatriz Garcia Osma

Universidad Carlos III de Madrid - Department of Business Administration ( email )

Calle Madrid 126
Getafe, Madrid, Madrid 28903
Spain

Araceli Mora

University of Valencia - Department of Accounting ( email )

Edificio Departamental Oriental
Avda. dels Tarongers, s/n
Valencia 46071
Spain

Register to save articles to
your library

Register

Paper statistics

Downloads
14
Abstract Views
3,156
PlumX Metrics