Highly valued equity and discretionary accruals

Journal of Business Finance and Accounting

Volumn 37, Issue 1-2, 2010, Pages 60-92

  Houmes, Robert E ^a   Skantz, Terrance R ^b  

^a JACKSONVILLE UNIVERSITY   (United States)

^b FLORIDA ATLANTIC UNIVERSITY   (United States)

Author keywords

CEO equity incentives; Discretionary accruals; Highly valued equity; Overvalued equity

Indexed keywords

EID: 77349089721     PISSN: 0306686X     EISSN: 14685957     Source Type: Journal    
DOI: 10.1111/j.1468-5957.2009.02179.x     Document Type: Article

References (62)

1. Anderson K, Brooks C. The Long-Term Price-Earnings Ratio. Journal of Business Finance & Accounting 2006, Vol. 33(Nos. 7 & 8):1063-86.
2. Astami E W, Tower G. Accounting-Policy Choice and Firm Characteristics in the Asia Pacific Region: An International Empirical Test of Costly Accounting Theory. The International Journal of Accounting 2006, Vol. 41(No. 1):1-21.
3. Badertscher B. Overvaluation and its Effect on Management's Choice of Alternative Earnings Management Mechanisms. 2008, 2008 FARS Meeting, Working Paper, Notre Dame University
4. Baker G, Hall B. CEO Incentives and Firm Size. Journal of Labor Economic 2004, Vol. 22(No. 4):767-98.
5. Balsam SJ, Yang J. Auditor Industry Specializations and Earnings Quality. Auditing: A Journal of Practice & Theory 2003, Vol. 22(No. 2):71-97.
6. Ball R, Kothari SP, Robin A. The Effect of International Institutional Factors on Properties of Accounting Earnings. Journal of Accounting and Economics 2000, Vol. 29(February):1-51.
7. Barton J, Simko P. The Balance Sheet as an Earnings Management Constraint. The Accounting Review 2002, Vol. 77(Supplement):1-27.
8. Barua A, Legoria J, Moffitt J S. Accruals Management to Achieve Earnings Benchmarks: A Comparison of Pre-Managed Profit and Loss Firms. Journal of Business Finance & Accounting 2006, Vol. 33(Nos. 5 & 6):653-70.
9. Basu Sanjay. Investment Performance of Common Stocks in Relation to their Price Earnings Ratios: A Test of the Efficient Market Hypothesis. Journal of Finance 1977, Vol. 32(No. 3):663-82.
10. Basu Sudipta. The Conservatism Principle and the Asymmetric Timeliness of Earnings. Journal of Accounting and Economics 1997, Vol. 24(No. 1):3-37.
11. Beatty A, Weber J, Wu J J. Conservatism and Debt. Journal of Accounting and Economics 2008, Vol. 45(Nos. 2 & 3):154-74.
12. Beatty R. Auditor Reputation and the Pricing of Initial Public Offerings. The Accounting Review 1989, Vol. 64(No. 3):693-709.
13. Becker C, DeFond M, Jimbalvo J, Subramaynam KR. The Effect of Audit Quality on Earnings Management. Contemporary Accounting Research 1998, Vol. 15(No. 1):4-24.
14. Beneish M, Nichols D. Identifying Overvalued Equity. 2008, Johnson School Research Paper Series No. 09-09, Indiana University and Cornell University
15. Black F. The Magic in Earnings: Economic Earnings Versus Accounting Earnings. Financial Analysts Journal 1980, Vol. 36(No. 6):19-24.
16. Burgstahler D, Dichev I. Earnings Management to Avoid Earnings Decreases and Losses. Journal of Accounting and Economics 1997, Vol. 24(No. 1):99-126.
17. Burns N, Kedia S. The Impact of Performance-Based Compensation on Misreporting. Journal of Financial Economics 2006, Vol. 79(No. 1):35-67.
18. Campbell J, Shiller R. Valuation Ratios and the Long-Run Stock Market Outlook: An Update. 2001, Working Paper No. 8221, National Bureau of Economic Research
19. Chang X, Gygax AF, Oon E, Zhang HF. Audit Quality, Auditor Compensation and Initial Public Offering Underpricing. Accounting and Finance 2008, Vol. 48(No. 3):391-416.
20. Cheng Q, Warfield T. Equity Incentives and Earnings Management. The Accounting Review 2005, Vol. 80(No. 2):441-76.
21. Chopra N, Lakonishok J, Ritter JR. Measuring Abnormal Performance: Do Stocks Overreact?. Journal of Financial Economics 1991, Vol. 31(No. 2):235-68.
22. Chow C, Rice S. Qualified Audit Opinions and Auditor Switching. The Accounting Review 1982, Vol. 57(No. 3):323-36.
23. Craswell AJ, Taylor S. Auditor Brand Name Reputations and Industry Specialization and Earnings Quality. Auditing: A Journal of Practice and Theory 1995, Vol. 23(No. 2):297-322.
24. de Bondt F, Thaler R. Does the Stock Market Overreact?. Journal of Finance 1984, Vol. 40(No. 3):793-804.
25. Dechow P. Accounting Earnings and Cash Flows as Measures of Firm Performance: The Role of Accounting Accruals. Journal of Accounting and Economics 1994, Vol. 18(No. 1):3-42.
26. Dechow P, Dichev I. The Quality of Accruals and Earnings: The Role of Accrual Estimation Errors. The Accounting Review 2002, Vol. 77(No. 1):35-59. Supplement
27. Dechow P, Sloan R, Sweeney A. Detecting Earnings Management. The Accounting Review 1995, Vol. 70(No. 2):193-225.
28. DeFond M, Jiambalvo J. Debt Covenant Violations and Manipulation of Accruals. Journal of Accounting and Economics 1994, Vol. 17(Nos. 1 & 2):145-76.
29. Dreman D, Lufkin E. Do Contrarian Strategies Work within Industries?. Journal of Investing 2000, Vol. 9(No. 3):6-37.
30. Efendi J, Srivastava A, Swanson E. Why Do Corporate Managers Misstate Financial Statements? The Role of Option Compensation and Other Factors. Journal of Financial Economics 2007, Vol. 85(No. 3):667-708.
31. Ettredge M, Scholz S, Smith K, Sun L. The Association Between Misstatements and Bloated Balance Sheets. 2007, Working Paper, University of Kansas and Rutgers University
32. Ferguson A, Francis J, Stokes D. The Effects of Firm-Wide and Office-Level Expertise on Audit Pricing. The Accounting Review 2003, Vol. 78(No. 2):429-48.
33. Francis J, Mayhew E, Sparks H. The Role of Big Six Auditors in the Credible Reporting of Accruals. Auditing: A Journal of Practice and Theory 1999, Vol. 18(No. 2):17-34.
34. Garcia Lara J M, Garcia Osma B, Mora A. The Effect of Earnings Management on the Asymmetric Timeliness of Earnings. Journal of Business Finance & Accounting 2005, Vol. 32(Nos. 3 & 4):691-726.
35. Gietzmann M, Ireland J. Cost of Capital, Strategic Disclosures and Accounting Choice. Journal of Business Finance & Accounting 2005, Vol. 32(Nos. 3 & 4):599-634.
36. Graham J, Harvey C, Rajgopal S. Value Destruction and Financial Reporting Decisions. Financial Analysts Journal 2006, Vol. 62(No. 6):27-39.
37. Hayn C. The Information Content of Losses. Journal of Accounting and Economics 1995, Vol. 20(No. 2):125-53.
38. Healy P. The Effect of Bonus Schemes on Accounting Decisions. Journal of Accounting and Economics 1985, Vol. 7(Nos. 1 & 3):85-107.
39. Hirshleifer D, Hou K, Teoh S, Zhang Y. Do Investors Overvalue Firms with Bloated Balance Sheets?. Journal of Accounting and Economics 2004, Vol. 38:297-331.
40. Jensen M. Agency Costs of Highly Valued Equity. Financial Management 2005, Vol. 34(No. 1):5-20.
41. Jones J. Earnings Management During Import Relief Investigations. Journal of Accounting Research 1991, Vol. 29(No. 2):193-228.
42. Kothari SP, Loutskina E, Nikolaev V. Agency Theory of Highly Valued Equity as an Explanation for the Accrual Anomaly. 2006, Working Paper, Massachusetts Institute of Technology, University of Virginia, and University of Chicago
43. Lakonishok J, Shleifer A, Vishny R. Contrarian Investment Extrapolation and Risk. Journal of Finance 1994, Vol. 49(No. 5):1541-78.
44. Lam S, Chng B. Do Executive Option Grants have Value Implications for Firm Performance?. Review of Quantitative Finance & Accounting 2006, Vol. 26(No. 3):249-74.
45. Lang M, Lundholm R. Cross-Sectional Determinants of Analyst's Rating of Corporate Disclosures. Journal of Accounting Research 1993, Vol. 31(No. 2):246-71.
46. Lennox C. Audit Quality and Auditor Size: An Evaluation of Reputation and Deep Pockets Hypothesis. Journal of Business Finance & Accounting 1999, Vol. 26(Nos. 7 & 8):779-805.
47. McVay E. Earnings Management Using Classification Shifting: An Examination of Core Earnings and Special Items. The Accounting Review 2006, Vol. 81(No. 3):501-32.
48. Mehran H, Tracy J. The Effect of Employee Stock Options on the Evolution of Compensation in the 1990s. FRBNY Economic Policy Review 2001, Vol. 7(No. 3):17-34.
49. Moeller S, Schlingemann F, Stulz R. Wealth Destruction on a Massive Scale? A Study of Acquiring-Firm Returns in the Recent Merger Wave. The Journal of Finance 2005, Vol. 60(No. 2):757-82.
50. Muurling R, Lehnert T. Option-Based Compensation: A Survey. The International Journal of Accounting 2004, Vol. 39(No. 4):365-401.
51. Myers J, Myers L, Omer T. Exploring the Term of the Auditor-Client Relationship and the Quality of Earnings: A Case for Mandatory Auditor Rotation. The Accounting Review 2003, Vol. 78(No. 3):779-99.
52. Pae J. Unexpected Accruals and Conditional Accounting Conservatism. Journal of Business Finance & Accounting 2007, Vol. 34(Nos. 5 & 6):681-704.
53. Palmrose Z. An Analysis of Auditor Litigation and Audit Service Quality. The Accounting Review 1988, Vol. 63(No. 1):55-73.
54. Petersen M. Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches. Review of Financial Studies 2009, Vol. 22(No. 1):435-80.
55. Press E, Weintrop J. Accounting-Based Constraints in Public and Private Debt Agreements: Their Association with Leverage and Impact on Accounting Choice. Journal of Accounting and Economics 1990, Vol. 12(Nos. 1-3):65-95.
56. Ryan S. Identifying Conditional Conservatism. European Accounting Review (Special Issue on Conservatism in Accounting) 2006, Vol. 15(No. 4):511-25.
57. Skinner D, Sloan R. Earnings Surprises, Growth Expectations and Stock Returns or Don't Let an Earnings Torpedo Sink Your Portfolio. Review of Accounting Studies 2002, Vol. 7(Nos. 2 & 3):289-312.
58. Sloan R. Do Stock Prices Fully Reflect Information in Accruals and Cash Flows About Future Earnings?. The Accounting Review 1996, Vol. 71(No. 3):289-315.
59. Teoh S, Wong T. Perceived Auditor Quality and the Earnings Response Coefficient. The Accounting Review 1993, Vol. 68(No. 2):346-66.
60. Watts R, Zimmerman J. Positive Accounting Theory 1986, Upper Saddle River, Prentice Hall
61. Watts R, Zimmerman J. Conservatism in Accounting Part I: Explanations and Implications. Accounting Horizons 2003a, Vol. 17(No. 3):207-21.
62. Watts R, Zimmerman J. Conservatism in Accounting Part II: Evidence and Research Opportunities. Accounting Horizons 2003b, Vol. 17(No. 4):287-301.