Performance matched discretionary accrual measures

S. P. Kothari, Andrew Leone, Charles E. Wasley

Research output: Contribution to journalArticle

1991 Citations (Scopus)

Abstract

We examine the specification and power of tests based on performance-matched discretionary accruals, and make comparisons with tests using traditional discretionary accrual measures (e.g., Jones and modified-Jones models). Performance matching on return on assets controls for the effect of performance on measured discretionary accruals. The results suggest that performance-matched discretionary accrual measures enhance the reliability of inferences from earnings management research when the hypothesis being tested does not imply that earnings management will vary with performance, or where the control firms are not expected to have engaged in earnings management.

Original languageEnglish (US)
Pages (from-to)163-197
Number of pages35
JournalJournal of Accounting and Economics
Volume39
Issue number1
DOIs
StatePublished - Feb 2005
Externally publishedYes

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Earnings management
Discretionary accruals
Management research
Inference
Return on assets

Keywords

  • Discretionary accruals
  • Discretionary-accruals models
  • Earnings management
  • Performance matching

ASJC Scopus subject areas

  • Accounting
  • Economics and Econometrics
  • Finance

Cite this

Performance matched discretionary accrual measures. / Kothari, S. P.; Leone, Andrew; Wasley, Charles E.

In: Journal of Accounting and Economics, Vol. 39, No. 1, 02.2005, p. 163-197.

Research output: Contribution to journalArticle

Kothari, S. P. ; Leone, Andrew ; Wasley, Charles E. / Performance matched discretionary accrual measures. In: Journal of Accounting and Economics. 2005 ; Vol. 39, No. 1. pp. 163-197.
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