Earnings Surprises in Analysts' Forecasts,Mandatory Disclosure,and Share Repurchases

This paper examines the impact of forecast errors and the mandatory disclosure of repurchase transactions required by 2003 Securities and Exchange Commission (SEC) regulations on share repurchases. We define forecast errors as the difference between analysts' forecasted earnings and actual earnings. We argue that firms with positive forecast errors imply greater information asymmetry, which may induce them to signal through share repurchases. We show that both the repurchase target and analysts' forecast revision are positively related to forecast errors. Furthermore, these associations are more pronounced in the low disclosure period (1989–2003) where greater information asymmetry between managers and outside investors is found, while increased transparency in the high disclosure period (2004–2006) leads to more significant improvement in long‐term performances for firms with positive forecast errors. The results are consistent with our expectations that the information asymmetry implied in forecast errors, along with a shock change from the introduction of the 2003 SEC regulation, affect both corporate and analysts' behaviour.     

Influence of Culture on Earnings Management: A Note

This article examines the influence of national culture on earnings management across a broad cross-section of countries. In addition to examining the relation between culture and earnings management in general, two different types of earnings management are examined, namely, earnings smoothing and earnings discretion. Regression results indicate that, as expected, the cultural dimensions of uncertainty avoidance and individualism are significantly related to earnings management, even after controlling for investor protection and other legal institutional factors. Culture has a stronger relation with earnings smoothing than with earnings discretion, and cultural dimensions explain a greater percentage of the variation in aggregate earnings management and earnings smoothing than do investor protection variables. These findings suggest that there is a significant link between culture and cross-national differences in earnings management, especially in the form of earnings smoothing.     

Dividends versus Share Repurchases Evidence from Canada: 1985–2003

This paper provides out-of-sample evidence on the payout policy in Canada during the 1985–2003 period. First, we show that the proportion of nonfinancial firms paying dividends has decreased, while the proportion initiating repurchase programs has increased. We also show that Canadian firms paying dividends and repurchasing shares are extremely concentrated. Second, we focus on the factors that could affect the choice between repurchases and dividends. We find that dividends and repurchases are used by different types of firms. While we do not confirm the financial flexibility hypothesis, our results are consistent with the substitution hypothesis after controlling for selection bias and endogeneity.     

Equity Undervaluation and Signaling Power of Share Repurchases with Legal Restrictions

This paper analyzes share repurchase programs, which are subject to specific legal restrictions in Taiwan, to determine whether the unique item repurchase price range conveys information regarding the degree of undervaluation and future prospects of a firm. We find that the price range conveys such information, not only about the past, but also the future. Companies with a higher upper bound of the repurchase price range experience better abnormal returns than do companies that do not. The lower bound of the price range does not efficiently convey the undervaluation effect, owing to the exemption clause in the announcement. Finally, the announced price range, in turn, conveys favorable information about the repurchasing firm and is a more powerful signal of future prospects than is the legal price range.     

Signaling Power of Open Market Share Repurchases in Germany

This paper shows that abnormal stock price returns around the date of open market repurchase announcements are four times higher in Germany than in the USA (12 ver. 3%). We hypothesize that this observation can be explained by national differences in repurchase regulations. Our empirical evidence indicates that German managers primarily buy back shares to signal an undervaluation of their firm. We demonstrate that the stringent repurchase process prescribed by German law attributes a higher credibility to undervaluation signals than do the lax US regulations, and thereby corroborates our hypothesis.Financial support from the E-Finance Lab, Frankfurt am Main, and from Freitag & Co., Frankfurt am Main, is gratefully acknowledged. We would like to thank two anonymous referees for their helpful comments     

Financial Expert CEOs and Earnings Management Around Initial Public Offerings

This study examines the association between financial expert CEOs and earnings management (EM) around initial public offerings. We identify financial expert CEOs as those having past experience in either banking or investment firms, large auditing firms, or finance-related roles. We find strong evidence that newly listed firms with financial expert CEOs are less likely to engage in either accrual-based or real EM in the offering year than those with non-financial expert CEOs. In particular, our results are robust after controlling for the potential selection issue that occurs due to non-random matching of CEOs to firms. In addition, we employ alternative measures of financial expertise, including past experience in a CFO position, financial experience variety, and professional qualifications. We document that CEOs who used to work as CFOs and those who gained varied financial experience are less likely to manage earnings through both accruals and real activities. Moreover, CEOs who have a professional qualification in finance and/or accounting are also associated with lower accrual-based EM.     

Top Management Team Characteristics and Accrual-Based Earnings Management

This study examines how top management team (TMT) knowledge and average tenure affect accrual-based earnings management by investigating 4791 Taiwanese listed companies from 2006 to 2010. TMT members with more knowledge (higher education level, more accounting expertise, and greater prior top management experience) and longer average tenure have better performances and higher reputations, and are more aware of the litigation costs of earnings manipulations; therefore, they reduce managers' incentives to manage earnings (incentive-reduction effect). On the other hand, these TMT members are also likely to become entrenched and engage in more earnings manipulations (entrenchment-enhancing effect). The empirical results show that firms' TMT knowledge and average tenure are negatively associated with discretionary accruals, suggesting that the incentive-reduction effect is stronger than the entrenchment-enhancing effect, which makes TMT members less likely to engage in earnings management. Moreover, the above results are robust when employing different earnings management measures and suspect firm analyses, as well as considering endogeneity issues. Finally, the study suggests that the presence of a founding family may reduce the influences of TMT knowledge and average tenure on earnings management.     

盈余管理问题初探

近年来,会计信息的质量问题普遍堪忧.盈余管理问题是影响会计信息质量的一大因素.对盈余管理的研究要正确划分盈余管理与财务欺诈的界限.另外,要认清盈余管理可能造成的后果.本文的研究重点在于盈余管理的资本市场动因以及影响,并提出正确判断企业是否存在盈余管理应解决的标准问题.     

Earnings Management of Firms Subjected to Product Price Controls

This study documents Australian firms' earnings management activities in response to product price controls established by the Australian government in the early 1970s. We predict that firms subject to price controls will adjust their discretionary accounting accruals downward to reduce reported net income and to increase the likelihood of approval of the requested price increase. To control for the confounding effect of performance, we analyse the performance of two groups of firms subject to price scrutiny prior to the event window and estimate the earnings management of these firms and a control group of firms during the period of scrutiny. Our results based on both longitudinal and a cross sectional experimental designs confirm that firms that were subject to the greatest scrutiny engaged in significant negative earnings management during the period of scrutiny, but not outside that period. Further, firms that were not subject to price controls did not engage in any significant earnings management during the same periods.
JEL classification: M41; M43     

Share Repurchases,Dividends and Executive Options: the Effect of Dividend Protection

We study the determinants of share repurchases and dividends in Finland. We find that higher foreign ownership serves as a determinant of share repurchases and suggest that this is explained by the different tax treatment of foreign and domestic investors. Further, we also find support for the signalling and agency cost hypotheses for cash distributions. The fact that 41% of the option programmes in our sample are dividend protected allows us to test more directly the ‘substitution/managerial wealth’ hypothesis for the choice of distribution method. When options are dividend protected, the relationship between dividend distributions and the scope of the options programme turns to a significantly positive one instead of the negative one documented in US data.     

公司治理结构与盈余管理模式的互动分析

公司治理结构影响会计信息质量,会计信息质量的高低对公司治理结构的完善起到关键作用.盈余管理通过会计政策的选择与公司治理结构产生关系,公司治理结构对盈余管理模式具有重要影响,这种影响体现在内部治理和外部治理两个方面.同时,不同的盈余管理模式对公司治理结构的完善起着不同的作用.     

管理者过度自信与企业盈余管理行为研究

本文以我国上市公司作为研究样本,依据行为金融理论,从管理者过度自信角度研究了企业盈余管理行为。研究发现,管理者过度自信既会导致公司正向盈余管理行为的发生,也会导致负向盈余管理行为的发生。进一步研究发现,女性比例越高的管理团队越有可能进行盈余管理,管理团队的年龄越小越有可能进行正向盈余管理,管理团队学历越低越有可能进行负向盈余管理行为。本文对研究公司选择会计政策行为,治理公司盈余管理行为乃至完善公司治理结构均具有一定的启示。     

Stock Price Reaction to Evidence of Earnings Management: Implications for Supplementary Financial Disclosure

We condition security price reactions to quarterly earnings announcements on whether firms disclose supplementary balance sheet and/or cashflow information that can be used to estimate the consequences of earnings management. Disclosure of supplementary information is voluntary, and thus, we consider the possibility that firms that disclose balance sheet and/or cashflow information differ systematically from firms that do not disclose. Results indicate that investors discount evidence of earnings management at the disclosure date when supplementary information is disclosed. Such results indicate more informed earnings interpretations of quarterly earnings when firms provide balance sheet and/or cashflow information concurrently.

Earnings and Impression Management in Financial Reports: The Case of CEO Changes

This article examines earnings management, as well as the presentational format of graphs (impression management) in the financial reports of sixty-three Australian listed public companies that changed chief executive officers (CEOs). Prior U.S. evidence generally suggests downward earnings management in the year of senior management changes and upward earnings management in the following year (Pourciau, 1993). We argue that new managers not only have incentives to manage earnings but also have similar incentives to manipulate the impressions created by graphs in financial reports. Examining earnings and impression management at the same time also provides an opportunity to distinguish between alternative explanations for any observed earnings management. In the year of CEO change, we hypothesize and find evidence of downward earnings management and some limited evidence of unfavourable impression management of the key financial variables (KFVs) graphed. As posited, we find evidence of upward earnings management and some evidence of favourable impression management in the year after a CEO change. These results are strongest for the subsample in which the CEO change was prompted by a resignation rather than a retirement.     

Directors' Recommendations on Takeover Bids and the Management of Earnings: Evidence from Australian Takeovers

This article investigates whether Australian companies manage their earnings during takeover bids in a manner consistent with the earnings-management hypothesis. This hypothesis predicts that directors who reject a bid use accrual accounting to increase current earnings, supporting their claim that the bid, relative to earnings, is inadequate. Likewise, directors who accept a bid are predicted to use accrual accounting to decrease current earnings. Overall, the results are not consistent with the earnings-management hypothesis. However, some components of unexpected accruals (our proxy for managed earnings) change in the direction predicted by the earnings-management hypothesis, although these changes are not statistically significant. Using industry adjusted performance measures the conclusion is that unexpected accruals are primarily a manifestation of poor financial performance of target firms in the period leading up to the takeover bid.     

On‐Market Share Buy‐Backs: ASX Disclosure Requirements and Compliance

Our paper investigates the compliance of Australian listed firms with the ASX disclosure rules for on‐market share buy‐backs. We find that firm compliance is reasonable for initial buy‐back announcements, but poor for final buy‐back notices. In the latter instance, the disclosure in the appropriate ASX notice is provided in only 53% of cases. Of significant concern is the even lower degree of final notice compliance (42%) for buy‐backs tagged as having ‘unlimited’ duration. Across our total sample of 807 buy‐backs, an alternative form of disclosure of buy‐back completion is provided in 25% of cases, and no proper notification of either the initial announcement or the completion of the buy‐back is provided in 12% of cases. In order to improve buy‐back transparency, some legislative reform of the ASX rules is suggested including: discontinuing ‘unlimited duration’ buy‐backs, restricting buy‐back periods to a maximum of twelve months (after which a new buy‐back process must be initiated), avoiding multiple simultaneous buy‐backs, removing the requirement of daily buy‐back notices in favour of more meaningful quarterly or monthly reports, and requiring greater disclosure in relation to foreign buy‐backs.     

董事会监管下的高管变更对盈余管理的影响研究

以我国上市公司为样本,对董事会监管下高管变更带来的盈余管理行为进行研究。实证结果表明:高管变更当年存在调减盈余行为;董事会监管程度与高管变更的概率有相关关系;董事会监管能抑制高管变更时的盈余管理行为。因此,我国上市公司应注重董事会制度建设,强化董事会监管作用,以规范盈余管理行为,促进我国上市公司健康、有效的发展。     

中国国有控股上市公司高管薪酬激励与盈余管理

以中国国有控股上市公司为样本,从盈余管理对高管薪酬及其薪酬业绩敏感性的影响两方面,研究高管薪酬激励与盈余管理的关系,实证检验表明在调高操控性应计利润情况下,盈余管理程度分别与管理者的年度报酬水平和股权激励呈正相关关系,另外,盈余管理对薪酬业债敏感性也有正向影响,据此提出了有效控制盈余管理行为的政策建议.     

应计与真实盈余管理：替代抑或互补

基于中国转型经济特有的制度环境,考察应计与真实盈余管理之间的相互关系。结果表明,在中国市场上,应计与真实盈余管理之间存在"二元"关系,即替代关系和互补关系。具体而言,市场竞争压力在应计与真实盈余管理之间具有明显的成本比较优势,使得两者具有替代关系。控制利益、管制压力在应计与真实盈余管理之间不具有显著的成本比较优势,而是应计与真实盈余管理的驱动因素,使得两者具有互补关系。