Discussion of “Why are Earnings Kinky? An Examination of the Earnings Management Explanation”
Review of Accounting Studies · 2003 · Volume 8 · Issue 2
Abstract
The Dechow et al. paper (2003, this issue) on the distribution of earnings raises an important question: why are earnings kinky? They conduct a number of tests of the earnings management explanation and do not find supportive evidence. They also provide evidence that a number of factors influence the magnitude of the discontinuity in earnings, suggesting that it is a poor proxy for the extent of earnings management. This discussion addresses the contribution of their study, the power of their tests and the implications for future research.
Keywords
Supportive Evidence, Earning Management, Management Explanation, Poor Proxy, Earning Management Explanation
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