| Summary: | 碩士 === 國立臺北大學 === 會計學系 === 94 === Total accruals account is the major measure used in past research regarding Earnings Management. The specific accruals method is not often used in this area. This paper focuses on three earnings-management contexts: equity offerings, merger, and firms avoiding earnings decreases, in order to examine the efficacy of specific accruals in Earnings Management.
Considering both the objective of Earnings Management and its potential management cost based on the cost effectiveness concern in this paper, I predict that unexpected AR is the main accruals item in the case of equity offerings and merger, while unexpected non-operating income and expense is frequently employed in firms avoiding earnings decreases. The other accruals items (such as unexpected inventory, unexpected AP, unexpected accruals liability, unexpected depreciation unexpected non-operating income and unexpected capital gain and unexpected investment gain) are also examined in this paper for their suitability in three specific Earnings Management scenarios. The methodology employed to measure specific Earnings Management is performance matching, as developed by Kothari et al. (2005)
I find that firms issuing equity appear to prefer managing earnings upwardly. Namely, firms imply that the future income will be continually increased. As a result, the level of AR seems to be particularly higher in these companies. It infers that firms prefer to accelerate revenue recognition rather than postpone expense recognition. Moreover, no evidence on the specific accruals used to manage earnings through AR in pre- or post-merger period. However, the empirical evidence does illustrate that firms attempt to utilize unexpected inventory and unexpected non-operating income to manage earnings in the case of merger. Otherwise, I predict the continuation of yielding earnings cannot be concerned in the scenario of firms avoiding earnings decreases. These firms attempt to enlarge their income through unexpected non-operating items. The empirical research also demonstrates that the mode of unexpected non-operating items in these firms is higher than others, particularly in the situation of economic depression.
In summary, no empirical evidence shows that the same specific accruals can be employed under three different earnings-management settings identified in this paper. Namely, no individual accrual in specific context is implemented for Earnings Management. It suggests that the specific accruals used to reach earnings goals would depend on the motivation behind earnings management.
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