Insider Trading and Earnings Management in Distressed Firms

Contemporary Accounting Research

Volumn 29, Issue 1, 2012, Pages 191-220

  Beneish, Messod D ^a   Press, Eric ^b   Vargus, Mark E ^c  

^a INDIANA UNIVERSITY   (United States)

^b TEMPLE UNIVERSITY   (United States)

^c DREXEL UNIVERSITY   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 81855181943     PISSN: 08239150     EISSN: 19113846     Source Type: Journal    
DOI: 10.1111/j.1911-3846.2011.01084.x     Document Type: Article

References (76)

1. Apple Computer Securities Litigation, 886 F.2d 1109, 1117 (9th Cir.1989).
2. Baesel, J., and G. Stein. 1979. The value of information: Inferences from the profitability of insider trading. Journal of Financial and Quantitative Analysis 14 (3): 553-71.
3. Begley, J., and G. Feltham. 1999. An empirical examination of the relation between debt contracts and management incentives. Journal of Accounting and Economics 27 (2): 229-59.
4. Beneish, M. D. 1997. Detecting GAAP violation: Implications for assessing earnings management among firms with extreme financial performance. Journal of Accounting and Public Policy 16 (3): 271-309.
5. Beneish, M. D. 1998. Discussion of "Are accruals during initial public offerings opportunistic?" Review of Accounting Studies 3 (1-2): 209-21.
6. Beneish, M. D. 1999. Incentives and penalties related to earnings overstatements that violate GAAP. The Accounting Review 74 (4): 425-57.
7. Beneish, M. D., and E. Press. 1993. Costs of technical violation of accounting-based debt covenants. The Accounting Review 68 (2): 233-57.
8. Beneish, M. D., and E. Press. 1995a. The resolution of technical default. The Accounting Review 70 (2): 337-53.
9. Beneish, M. D., and E. Press. 1995b. Interrelation among events of default. Contemporary Accounting Research 12 (1): 57-84.
10. Beneish, M. D., and M. Vargus. 2002. Insider trading, earnings quality, and accrual mispricing. The Accounting Review 77 (4): 755-91.
11. Blockbuster Inc. Securities Litigation, WL 884308 (N.D. Tex. April 24, 2004).
12. Carlton, D., and D. Fischel. 1983. The regulation of insider trading. Stanford Law Review 35: 857-95.
13. Cheng, Q., and K. Lo. 2006. Insider trading and voluntary disclosures. Journal of Accounting Research 44 (5): 815-48.
14. Cheng, Q., and T. Warfield. 2005. Equity incentives and earnings management. The Accounting Review 80 (2): 441-76.
15. Cohen, D., A. Dey, and T. Lys. 2008. Real and accrual-based earnings management in the pre- and post-Sarbanes Oxley periods. The Accounting Review 83 (3): 757-87.
16. Dechow, P., R. Sloan, and A. Sweeney. 1995. Detecting earnings management. The Accounting Review 70 (2): 193-225.
17. Dechow, P., R. Sloan, and A. Sweeney. 1996. Causes and consequences of earnings manipulation: An analysis of firms subject to enforcement actions by the SEC. Contemporary Accounting Research 13 (1): 1-36.
18. DeFond, M., and J. Jiambalvo. 1994. Debt covenant violation and manipulation of accruals. Journal of Accounting and Economics 17 (1/2): 145-76.
19. Dhaliwal, D. S., G. L. Salamon, and E. D. Smith. 1982. The effect of owner versus manager control on the choice of accounting methods. Journal of Accounting and Economics 4 (1): 41-53.
20. Dichev, I., and D. Skinner. 2002. Large sample evidence on the debt covenant hypothesis. Journal of Accounting Research 40 (4): 1091-123.
21. Donaldson, J., and R. Weigand. 2005. Firm performance and insider trading: A comparison between voluntary and involuntary bankruptcy filings. Journal of Business Leadership 1 (1): 12-22.
22. Dye, R. 1984. Insider trading and incentives. Journal of Business 57 (3): 295-313.
23. Elliot, J., D. Morse, and G. Richardson. 1984. The association between insider trading and information announcements. Rand Journal of Economics 15 (4): 521-36.
24. Fama, F. 1980. Agency problems and the theory of the firm. Journal of Political Economy 88 (2): 288-307.
25. Fama, F., and M. Jensen. 1983. Separation of ownership and control. Journal of Law and Economics 26 (2): 301-26.
26. Finnerty, J. 1976. Insiders and market efficiency. The Journal of Finance 31 (4): 1141-48.
27. Frankel, R., P. Joos, and J. Weber. 2003. Litigation risk and voluntary disclosure: The case of pre-earnings announcement quiet periods. Working paper, Massachusetts Institute of Technology.
28. Freeman v. Decio, 584 F.2d 186, 197 (7th Cir. 1978).
29. Gaver, J., and K. Gaver. 1993. Additional evidence on the association between the investment opportunity set and corporate financing, dividend, and compensation policies. Journal of Accounting and Economics 16 (1-3): 125-60.
30. Givoly, D., and D. Palmon. 1985. Insider trading and the exploitation of inside information: Some empirical evidence. Journal of Business 58 (1): 69-87.
31. Grundfest, J., and M. Perino. 1997. Securities litigation reform: The first year's experience (a statistical and legal analysis of securities fraud litigation under the Private Securities Litigation Reform Act). Working Paper No. 140, Stanford Law School.
32. Holthausen, R. W., and R. W. Leftwich. 1983. The economic consequences of accounting choice: Implications of costly contracting and monitoring. Journal of Accounting and Economics 5: 77-117.
33. Huddart, S., B. Ke, and C. Shi. 2007. Jeopardy, non-public information and insider trading around SEC 10-K and 10-Q filings. Journal of Accounting and Economics 43 (1): 3-36.
34. Jaffe, J. 1974. Special information and insider trading. Journal of Business 47 (3): 410-28.
35. Jensen, M., and W. Meckling. 1976. Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics 3 (4): 305-60.
36. John, K., and L. Lang. 1991. Insider trading around dividend announcements: Theory and evidence. The Journal of Finance 46 (4): 1361-89.
37. Johnson, M., K. Nelson, and A. Pritchard. 2007. Do the merits matter more? The impact of the Private Securities Litigation Reform Act. Journal of Law, Economics, and Organizations 23 (3): 627-52.
38. Jones, J. 1991. Earnings management during import relief investigations. Journal of Accounting Research 29 (2): 193-228.
39. Ke, B., S. Huddart, and K. Petroni. 2003. What insiders know about future earnings and how they use it: Evidence from insider trades. Journal of Accounting and Economics 35 (3): 315-46.
40. Kothari, S., A. Leone, and C. Wasley. 2005. Performance matched discretionary accrual measures. Journal of Accounting and Economics 39 (1): 163-97.
41. Krishnan, J., and J. Krishnan. 1997. Litigation risk and auditor resignations. The Accounting Review 72 (4): 539-60.
42. Lakonishok, J., and I. Lee. 2001. Are insiders trades informative? Review of Financial Studies 14 (1): 79-111.
43. La Porta, R., F. Lopez-de-Silanes, and A. Shleifer. 2006. What works in securities laws? The Journal of Finance 41 (1): 1-32.
44. Lev, B. 1992. Information disclosure strategy. California Management Review 34 (4): 9-32.
45. Lewellen, W., C. Loderer, and K. Martin. 1987. Executive compensation contracts and executive incentive problems: An empirical analysis. Journal of Accounting and Economics 9 (3): 287-310.
46. Lin, J., and J. Howe. 1990. Insider trading in the OTC market. The Journal of Finance 45 (4): 1273-84.
47. Lorie, J., and V. Niederhoffer. 1968. Predictive and statistical properties of insider trading. Journal of Law and Economics 11 (1): 35-53.
48. Lu, Y. 2003. Earnings management and securities litigation. Working paper, Stanford University.
49. Madden, G. 1979. The performance of common stocks after intensive trading by insiders. The Financial Review 14 (1): 27-35.
50. McNichols, M. 2000. Research design issues in earnings management studies. Journal of Accounting and Public Policy 19 (4-5): 313-45.
51. McNichols, M., P. Wilson, and L. DeAngelo. 1988. Evidence of earnings management from the provision for bad debt. Journal of Accounting Research 26 (3): 1-31.
52. McVay, S., V. Nagar, and V. W. Tang. 2006. Trading incentives to meet the analyst forecast. Review of Accounting Studies 11 (4): 575-98.
53. Niehaus, G., and G. Roth. 1999. Insider trading, equity issues, and CEO turnover in firms subject to securities class action. The Journal of Financial Management Association 28 (4): 52-72.
54. Noe, T. 1997. Insider trading and the problem of corporate agency. Journal of Law, Economics, and Organization 13 (2): 287-318.
55. Nunn, K., G. Madden, and M. Gombola. 1983. Are some insiders more inside than others? Journal of Portfolio Management 9 (3): 18-22.
56. Park, S., and T. Park. 2004. Insider sales and earnings management. Journal of Accounting and Public Policy 23 (5): 381-411.
57. Penman, S. 1982. Insider trading and the dissemination of firms' forecast information. Journal of Business 55 (4): 479-503.
58. Penman, S. 1985. A comparison of the information content of insider trading and management earnings forecasts. Journal of Financial and Quantitative Analysis 20 (1): 1-17.
59. Pope, P., R. Morris, and D. Peel. 1990. Insider trading: Some evidence on market efficiency and directors' share dealings in Great Britain. Journal of Business Finance and Accounting 17 (3): 359-80.
60. Provenz v. Miller, 102 F.3d 1478, 1491 (9th Cir. 1996).
61. Rogers, J. 2008. Disclosure quality and management trading incentives. Journal of Accounting Research 46 (5): 1265-96.
62. Romano, R. 1991. The shareholder suit: Litigation without foundation? The Journal of Law, Economics, and Organization 7 (1): 55-87.
63. Rozeff, M., and M. Zaman. 1988. Market efficiency and insider trading: New evidence. Journal of Business 61 (1): 25-44.
64. Securities and Exchange Commission (SEC). 1998. Remarks by Newkirk, T., Robertson, M. September 19. Sixteenth International Symposium on Economic Crime. Jesus College, Cambridge, England.
65. Seyhun, H. 1986. Insider profits, costs of trading, and market efficiency. Journal of Financial Economics 16 (2): 189-212.
66. Seyhun, H. 1998. Investment intelligence from insider trading. Cambridge, MA: MIT Press.
67. Seyhun, H., and M. Bradley. 1997. Corporate bankruptcy and insider trading. Journal of Business 70 (2): 189-216.
68. Shleifer, A., and R. Vishny. 1997. A survey of corporate governance. The Journal of Finance 52 (2): 737-83.
69. Skinner, D. 1994. Why firms voluntarily disclose bad news. Journal of Accounting Research 32 (1): 38-60.
70. Smith, C., and R. Watts. 1992. The investment opportunity set and corporate financing, dividend and compensation policies. Journal of Financial Economics 32 (3): 263-92.
71. Smith, C. W., and J. B. Warner. 1979. On financial contracting: An analysis of bond covenants. Journal of Financial Economics 7 (2): 117-61.
72. Sweeney, A. 1994. Debt covenant violations and managers' accounting responses. Journal of Accounting and Economics 17 (3): 281-308.
73. Teoh, S., T. Wong, and G. Rao. 1998. Are accruals during initial public offerings opportunistic? Review of Accounting Studies 3 (1-2): 175-208.
74. Warfield, T., J. Wild, and K. L. Wild. 1995. Managerial ownership, accounting choices, and informativeness of earnings. Journal of Accounting and Economics 20 (1): 61-91.
75. Watts, R. 2003. Conservatism in accounting, Part I: explanations and implications. Accounting Horizons 17 (3): 207-21.
76. Wenger v. Lumisys, Inc., 2\F Supp. 2nd 1231, 1252 (N.D. Cal. 1998).