Myopia and earnings management strategies

Date
2017-08-30
Authors
Haga, Jesper
Huhtamaki, Fredrik
Sundvik, Dennis
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Abstract
In this study, we investigate how country-level myopia affects managers’ willingness to engage in earnings management and choice of earnings management strategy. Using a comprehensive dataset of 47 countries for the time period from 2003 to 2015, we find that firms in short-term oriented cultures engage in more real earnings management, while firms in long-term oriented cultures rely on earnings management through accruals manipulation. Furthermore, we find a larger discontinuity around earnings benchmarks in long-term oriented cultures suggesting that utilization of AM enables benchmark beating with high precision.
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Keywords
culture, earnings management, international financial reporting, myopia
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