وضعیت فهرست نویسی بازار سهام و مدیریت سود واقعی
Abstract
1- Introduction
2- Estimation of earnings management, data and descriptive statistics
3- Regression models and results
4- Additional analyses
5- Conclusions
References
Abstract
This study analyzes real earnings management among privately held versus publicly listed firms. Our first finding is that public firms engage in more earnings management through operating activities. When a clear incentive to manage earnings in a specific direction is present we continue to find that public firms manage their earnings more than private firms. We reason that capital market pressure and ownership characteristics drive our results. Additional analyses reveal that public firms employ more real earnings management as a proportion of the total earnings management strategy. Furthermore, we find that mitigating factors of real earnings management have stronger impact in public firms. This study contributes to literature on non-accrual earnings management and to the broader understanding about the private vis-à-vis public firm reporting and operating behavior. Finally, we contribute by identifying an important societal cost of stock market listing, which is the increase in potentially value-destroying real earnings management.
Introduction
In this study, we investigate differences between privately held and publicly listed firms regarding the extent of value-destroying real earnings management (hereafter REM), such as cutting R&D or advertising spending to avoid losses. A number of prior studies document that firms employ REM, which affects the cash flow component of earnings, in various settings. For example, researchers find REM in earnings target beating contexts (Roychowdhury, 2006), around seasoned equity offerings (Cohen and Zarowin, 2010), prior to initial public offerings (Alhadab et al., 2015), and for credit rating concerns (Brown et al., 2015). Most prior studies generally focus on public firms while the vast majority of firms globally are, in fact, private. Meanwhile, researchers have investigated the occurrence of an alternative form of earnings management, accrual-based earnings management (hereafter AEM), in both private and public firms. In contrast to REM, the concept of AEM is concerned with managerial discretion over the accrual component of earnings. When comparing the extent of AEM among private versus public firms, Burgstahler et al. (2006) and Hope et al. (2013) find lower financial reporting quality or more absolute AEM among private firms in Europe and the US, respectively. Hope et al. (2013) furthermore show that more AEM occurs among public firms in settings where there is a reduced demand for financial information or in the presence of strong incentives for earnings management. In addition, Givoly et al. (2010) conclude that firms with publicly held equity engage in more AEM than firms with publicly held debt. To date, no study to our knowledge focus on whether private and public firms engage differently in REM. As such, we aim to provide empirical evidence on this matter.