Earnings management through discretionary accruals: evidences from COMPUSTAT

descriptionPublicationkeyboard_double_arrow_right Article 01 Jan 2006 English Publisher:Inderscience PublishersJournal:International Journal of Services and Standards, volume 2, page 190 (issn: 1740-8849, eissn: 1740-8857,

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Authors: Haiyan Zhou; Kai S. Koong;

doi: 10.1504/ijss.2006.008732

Earnings management through discretionary accruals: evidences from COMPUSTAT

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Abstract

This study examines the existence and prevalence of earnings management behaviour through Discretionary Accruals (DA). Using the modified Jones cross-sectional model to identify DA, firms listed in the COMPUSTAT database were classified into four groups based on their level of Pre-Discretionary Income (PDI): big-bath firms, loss avoidance firms, firms with small positive earnings and sugar-bowling firms. For big-bath firms and loss avoidance firms, the relationship between DA and PDI was found to be positive. Among firms with small positive earnings and sugar bowling, the relationship was negative.

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University of Texas–Pan American
United States

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