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    Earnings Management, Conservatism, and Earnings Quality (Foundations and Trends in Accounting)

     
    Earnings Management, Conservatism, and Earnings Quality (Foundations and Trends in Accounting)

    Description

    Earnings Management, Conservatism, and Earnings Quality reviews and illustrates earnings
    management, conservatism, and their effects on earnings quality in an economic modeling
    framework. Both earnings management and conservative accounting introduce biases to
    financial reports. The fundamental issue addressed is what economic effects these biases
    have on earnings quality or financial reporting quality.

    Earnings Management, Conservatism, and Earnings Quality reviews analytical models of
    earnings management and conservatism and shows that both can have beneficial or
    detrimental economic effects, so a differentiated view is appropriate. Earnings management
    can provide additional information via the financial reporting communication channel, but it can
    also be used to misrepresent the firm's position. What the authors find is that similar to
    earnings management, conservatism can reduce the information content of financial reports if
    it suppresses relevant information, but it can be a desirable feature that improves economic
    efficiency. The approach to study earnings management, conservatism, and earnings quality
    is based on the information economics literature. A variety of analytical models are reviewed
    that capture the effects and subtle interactions of managers' incentives and rational
    expectations of users. The benefit of analytical models is to make precise these, often highly
    complex, strategic effects. They offer a rigorous explanation for the phenomena and show that
    sometimes conventional wisdom does not apply. The monograph is organized around a few
    basic model settings, which are presented in simple versions first and then in extensions to
    elicit the main insights most clearly.

    Section 2 presents the basic rational expectations equilibrium model with earnings
    management and rational inferences by the capital market. Section 3 is devoted to earnings
    quality and earnings quality metrics used in many studies. Section 4 studies conservatism in
    accounting. Finally, the authors examine the interaction between conservatism and earnings
    management. Each section ends with a section containing a summary of the main findings
    and conclusions.

    Product details

    EAN/ISBN:
    9781601986023
    Medium:
    Paperback
    Number of pages:
    134
    Publication date:
    2012-12-05
    Publisher:
    Now Publishers Inc
    EAN/ISBN:
    9781601986023
    Medium:
    Paperback
    Number of pages:
    134
    Publication date:
    2012-12-05
    Publisher:
    Now Publishers Inc

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