Errors in estimating unexpected accruals in the presence of large changes in net external financing

Shan, Y; Taylor, SL; Walter, TS

Errors in estimating unexpected accruals in the presence of large changes in net external financing

Shan, Y

Taylor, SL

Walter, TS

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Publisher:: AFAANZ
Publication Type:: Conference Proceeding
Citation:: 2009 AFAANZ Conference, 2009, pp. 1 - 54
Issue Date:: 2009-01

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Field	Value	Language
dc.contributor.author	Shan, Y https://orcid.org/0000-0003-2156-8722	en_US
dc.contributor.author	Taylor, SL https://orcid.org/0000-0001-8870-4966	en_US
dc.contributor.author	Walter, TS	en_US
dc.contributor.editor	Faff, R	en_US
dc.date	2009-07-05	en_US
dc.date.issued	2009-01	en_US
dc.identifier.citation	2009 AFAANZ Conference, 2009, pp. 1 - 54	en_US
dc.identifier.issn	1328-780X	en_US
dc.identifier.uri	http://hdl.handle.net/10453/12718
dc.description.abstract	We demonstrate that the articulation among accruals, cash flows and revenues which is typically assumed in tests of earnings management does not hold when large (positive or negative) external financing activities are present. Our study provides evidence that managers normal operating decisions associated with net external financing activities are likely to lead to economically and statistically significant measurement errors in unexpected accruals. This is a serious concern given the frequency with which the partitioning variable used to identify instances of alleged earnings management is correlated with significant movements in net external financing. Simulation tests show that even at modest levels of net external financing changes, rejection frequencies for the null hypothesis of no earnings management rise dramatically	en_US
dc.publisher	AFAANZ	en_US
dc.relation.ispartof	2009 AFAANZ Conference	en_US
dc.relation.ispartof	Accounting and Finance Association of Australia and New Zealand Conference	en_US
dc.title	Errors in estimating unexpected accruals in the presence of large changes in net external financing	en_US
dc.type	Conference Proceeding
utslib.location	Australia	en_US
utslib.location.activity	Adelaide, Australia	en_US
utslib.for	150303 Corporate Governance and Stakeholder Engagement	en_US
dc.location.activity	Adelaide, Australia	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Accounting Discipline
utslib.copyright.status	open_access
pubs.consider-herdc	false	en_US
pubs.place-of-publication	Australia	en_US
pubs.start-date	2009-07-05	en_US

Abstract:

We demonstrate that the articulation among accruals, cash flows and revenues which is typically assumed in tests of earnings management does not hold when large (positive or negative) external financing activities are present. Our study provides evidence that managers normal operating decisions associated with net external financing activities are likely to lead to economically and statistically significant measurement errors in unexpected accruals. This is a serious concern given the frequency with which the partitioning variable used to identify instances of alleged earnings management is correlated with significant movements in net external financing. Simulation tests show that even at modest levels of net external financing changes, rejection frequencies for the null hypothesis of no earnings management rise dramatically

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10453/12718