Accruals, Earnings Quality and Research Methodology

Authors

  • B. Brian Lee Prairie View A&M University
  • Alfreda Dobiyanski Prairie View A&M University
  • Marianna Sviland Prairie View A&M University
  • Limin “Pricilla” Zhu Prairie View A&M University

DOI:

https://doi.org/10.33423/jabe.v22i1.2717

Keywords:

Business, Economics, discretionary accruals, earnings quality, discontinuities in earnings distributions, frequencies of digits in accounting numbers, Research Methodology, Accruals

Abstract

We first review prior earnings management studies with an emphasis on discretionary accruals as a proxy for earnings management. Discretionary accruals are estimated using widely accepted models, such as the Jones model or its updated ones with additional control variables to improve their prediction power. Nonetheless, estimated discretionary accruals are still subject to model specification errors. Then, we review alternative methods to identify earnings management by evaluating earnings distribution properties and frequencies of digits in collected accounting numbers. These alternative methods can identify anomalies in earnings distributions or frequencies of digits but cannot explain how such anomalies take place. Accordingly, future studies of earnings management may employ these alternative methods in conjunction with discretionary accruals to offer a better insight into earnings management practices.

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Published

2020-03-24

How to Cite

Lee, B. B., Dobiyanski, A., Sviland, M., & Zhu, L. “Pricilla”. (2020). Accruals, Earnings Quality and Research Methodology. Journal of Applied Business and Economics, 22(1). https://doi.org/10.33423/jabe.v22i1.2717

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Articles