Firm life cycle and detection of accrual-based earnings manipulation

Chang, Hye Sun

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https://hdl.handle.net/2142/78349 Copy

Description

Title

Firm life cycle and detection of accrual-based earnings manipulation

Author(s)

Chang, Hye Sun

Issue Date

2015-04-20

Director of Research (if dissertation) or Advisor (if thesis)

Li, Laura Yue

Doctoral Committee Chair(s)

Li, Laura Yue

Committee Member(s)

• Sougiannis, Theodore
• Donohoe , Michael
• Liang, Feng

Department of Study

Accountancy

Discipline

Accountancy

Degree Granting Institution

University of Illinois at Urbana-Champaign

Degree Name

Ph.D.

Degree Level

Dissertation

Keyword(s)

• firm life cycle
• estimation samples
• discretionary accruals
• earnings management

Abstract

The identification of estimation samples is important for estimating discretionary accruals using an accrual model. This study proposes an alternative identification of estimation samples using a firm’s life cycle (i.e., life cycle-based estimation samples). Analyses using U.S. and international data show that when detecting accrual manipulation, life cycle-based estimation samples outperform industry-based or size-based estimation samples in sample retention, specification, and detection power. Improved detection power by life cycle-based estimation samples is also evident in the AAERs sample. Lastly, I reexamine Dechow, Richardson, and Tuna (DRT) (2003) and Teoh, Wong, and Rao (TWR) (1998) applying life cycle-based estimation samples. I find that life cycle-based estimation samples change the inferences from DRT by improving test power and mitigate misspecification in TWR. Collectively, the current study provides empirical evidence that supports the use of life cycle-based estimation samples over other existing estimation samples.

Graduation Semester

2015-5

Type of Resource

text

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http://hdl.handle.net/2142/78349

Copyright and License Information

Copyright 2015 Hye Sun Chang

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