Walker, M. (2013). How far can we trust earnings numbers? What research tells us about earnings management. Accounting and Business Research, 43(4), 445-481. Watts, R. L., & Zimmerman, J. L. (1986). Positive accounting theory, The Accounting Review, 65(1), 131-156. Xu, R. Z., Taylor, G. K., & Dugan, M. T. (2007). Review of real earnings management literature. Journal of Accounting Literature, 26(3), 195-228. Yamano, T., Lectures notes on Advanced Econometrics. Retrieved 2013. Yin, G. K. (2001). Getting serious about corporate tax shelters: Taking a lesson from history. SMUL Rev., 54, 209. Appendix Author(s) Object of the study Sample Outcome Blaylock, Gaertner, Shevlin (2014) Investigate the association between book-tax conformity and earnings management. Firm-year observations in Compustat’s Global Vantage files from 1996 to 2007 with necessary data to compute our four earnings management variables. Correlation tests. Positive association exists between earnings management and book-tax conformity. Tang (2014) This article focusses on the relation between the book-tax conformity and opportunistically reporting of taxable income and financial profits. The sample is taken from the year 1995 till the year 2007 and yields 372 country-year observations across 32 countries. Regression. The main results obtained in this analysis suggest that conformity deters earnings management and tax avoidance.
Phillips, Pincus, Rego (2003) The deferred tax expense in examining a potential relation with earnings management besides this objective the researchers also compare the usefulness of deferred tax expense over three specific accrual models in detecting. earnings management. A sample period which starts in 1994 and ends in 2000. Probit regression. They conclude that the deferred tax expense is more useful in detecting earnings management than accrual models are. Phillips, Pincus, Rego, Wan (2004) to find out whether certain deferred tax asset and deferred tax liability components are associated with earnings management. The sample is gathered from the Compustat database and the sample period consists of the years 1994 till 2000. The final sample consists of 396 firm-year observations. Probit regression. The authors find that changes in specific components of the deferred tax liability are significantly useful in detecting earnings management, whereas the total deferred tax liability is not. These specific components are the revenue and expense accruals and reserves. With these findings hypothesis 2 is confirmed. The other hypotheses remain unconfirmed due to insignificant relations.
Coppens & Peek (2005) This study examines the shapes of and discontinuities in the earnings distributions of private firms by comparing this with the public firms as a benchmark. Large private firms in Belgium, Denmark, France, Germany, Italy, the Netherlands, Spain and the U.K. between 1993 and 1999 Earnings distributions The results show that private firms manage earnings to avoid losses in both high alignment countries and in low alignment countries. However they fail to reject the second hypothesis, namely that private firms manage earnings to avoid earnings decreases. Schrand & Wong (2003) Whether banks do earnings management by setting a high valuation allowance associated with deferred tax assets and if banks adjust the valuation allowance in the subsequent periods. The final sample consists of 235 banks that adopted SFAS 109 in 1993. Regression The results show that valuation allowances against deferred tax assets are an earnings management tool used by banks. The sample is restricted to banks and it does not capture the behavior of other companies.
Christensen et al. (2008) The researchers examine whether firms choose the level of the valuation allowance against deferred tax assets when they incur special charges like restructuring costs or write-offs. The sample exists of 444 bath firms and 444 control firms. The results for the first hypothesis are that there is no evidence on average that bigger bath firms establish larger than necessary valuation allowances in order to reverse those and increasing earnings in year +1. The results for hypothesis H1B are that the magnitude of a valuation allowance provides information about how it will perform in the future. Burgstahler & Dichev In this study researchers examine whether there is that firms do earnings management to avoid earnings decreases and losses. For the study Burgstahler and Dichev used all available observations of the annual industrial and research Compustat databases for the year 1976-1994 which meet minimal data requirements. Earnings distribution and statically test. Burgstahler and Dichev (1997) found that firms use earnings management to avoid earnings decreases and losses.