Earnings Management through Specific Accruals and Discretionary Expenses: Evidence from U.S. Agribusiness Firms |
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| Authors: | Carlos JO Trejo‐Pech Richard N Weldon Michael A Gunderson |
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| Institution: | 1. School of Business and Economics, Universidad Panamericana, Guadalajara, Mexico;2. Visiting Scholar, Center for Food and Agricultural Business, Purdue University, West Lafayette, IN;3. 352-294-7635;4. Food and Resource Economics, University of Florida, Gainesville, FL;5. 765-496-2010;6. Center for Food and Agricultural Business, Purdue University, West Lafayette, IN |
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| Abstract: | This study examines both accruals based earnings management (AEM) and real earnings management (REM) in U.S. agribusinesses. In particular, the focus is on agribusinesses that report low earnings quality, defined as firms with extreme level of accruals compared to their peers. The cross‐sectional modified Jones model (Jones 1991; Dechow et al 1995) is used to test for AEM. To capture REM practices, we implement the discretionary expenses model by Roychowdhury (2006). We find evidence of AEM and find no evidence of REM in agribusinesses. In addition, our results show that managers might be managing earnings through specific accruals doubtful accounts receivable provisions and special items. |
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