This study presents a comprehensive evaluation of managerial choice of discretionary accounting methods and the use of the reporting process in income smoothing. After analyzing concepts of smoothing behavior, including managerial motivations to engage in smoothing, security market reactions to smoothing efforts are empirically tested to corroborate managerial motivations for, and security market evaluations of, income smoothing. This study looks at income smoothing using reporting variables as involving the choice of a portfolio of discretionary accounting methods over a period of time with the effect of reducing the fluctuations of reported earnings relative to cash flows. After identifying smoothing behavior, the study tests hypotheses of differential information content of accounting earnings by looking at the security market reactions to the release of financial reports. In addition to changes in security prices, the study also looks at other capital market variables such as the systematic risk and changes in dividends. A pooled time-series cross sectional regression analysis using an estimated generalized least squares estimator finds significant differences in the risk-adjusted security returns of 104 smoothing and 29 non-smoothing firms around the quarterly earnings announcement dates from June 1984 to March 1987. Non-smoothing firms have a higher market reaction around the announcement time, implying a higher level of prior market uncertainty about their future earnings and cash flows. This result is consistent across different estimation methods and sub-samples. In addition, a cumulative average abnormal return analysis shows similar differences in the indirect information content of accounting earnings over a period of 12 months for the three years 1984 to 1986. In additional empirical tests, the study finds that the average systematic risk of the smoothing firms is significantly lower than the average systematic risk of non-smoothing firms. This is in line with the conclusions about the higher prior level of uncertainty of the market about the future earnings and cash flows of non-smoothing firms. The non-smoothing firms had fewer changes in dividends declared, probably due to the dividend payments being used as a signalling device to reduce some of the prior uncertainties about the future financial performance of the non-smoothing firms.

The purpose of this thesis is to examine the economic consequences of and constraints on real earnings management. My thesis consists of two essays. In the first essay, I examine the association between real earnings management and the cost of new corporate bond issues. Three types of real earnings management are considered: sales manipulation, overproduction and abnormal reduction of discretionary expenditures. Using the sample from 1993 to 2004, I find that cost of debt is negatively related to the proxies for sales manipulation, abnormal reduction of discretionary expenses and the overall real earnings management for firms without using stock options to compensate their managers. When managerial compensation is linked to option awards, however, the negative association between real earnings management and cost of debt is attenuated. Overproduction does not show a significant effect on bond yield spread. Overall, these results suggest that, in the primary bond market, mispricing of real earnings management exists, especially for firms that do not have executive stock option plans. In the second essay, I investigate the effect of quality board and takeover protection on real earnings management. Four types of real earnings management are considered in this essay: sales manipulation, overproduction, abnormal reduction of R&D expenses and abnormal reduction of discretionary expenditures (other than R&D). Using panel data from U.S. public firms in the post-Sarbanes-Oxley Act period (2004-2006), I find that the level of real earnings management (abnormal decline in R&D expenses and other discretionary expenses) increases with better board governance and decreases with higher takeover protection. The effects of these two governance factors on sales manipulation and overproduction cost are weak. Overall, the results suggest that the monitoring role of boards may put short-term market pressure on managers, / Cette thèse à pour objectif d'examiner les conséquences économiques autant que les contraintes sur la vraie gestion de revenus. Ma thèse se compose de deux essais. Dans le premier essai, j'ai examiné la relation entre la vraie gestion de revenus et le coût des nouveaux emprunts obligataires d'une entreprise. Trois scénarios de vraie gestion de revenus sont considérés : la manipulation de ventes, l'effect de surproduction et enfin, la réduction anormale de dépenses discrétionnaires. En utilisant l'échantillon provenant de l'an 1993 à 2004, j'ai constaté que le coût de la dette est négativement relié aux procurations de la manipulation de ventes, de la réduction anormale de dépenses discrétionnaires et de la vraie gestion globale de revenus pour les sociétés qui n'emploient pas les options d'achat d'actions comme méthodes compensatoires exécutifs. Cependant, quand la compensation gestionnaire est reliée aux récompenses d'option, l'association négative entre de vrais revenus gestion et le coût de dette est diminuée. Dans ce cas, la surproduction ne cause pas d'effet significatif sur la diffusion de rendement en esclavage. De façon générale, ces résultats suggèrent que, sur le marché des obligations primaire des obligations, l'évaluation erronée de la vraie gestion de revenus existe encore, particulièrement pour les sociétés qui n'ont pas les plans d'options sur titres exécutifs.Dans le deuxième essai, j'ai étudié l'effet d'avoir accès à un conseil de qualité et de la protection de changement sur la vraie gestion de revenus. Quatre scénarios de vraie gestion de revenus sont considérés dans cette rédaction: la manipulation de ventes, la surproduction, la réduction anormale de R & D et la réduction anormale de dépenses discrétionnaires (autre que R&D). En utilisant des données de panneau des sociétés publiques établies dans la période du Sarbane

<p> This study uses an institutional theory perspective to examine whether significant changes to the audit work and engagement practices required under the Sarbanes-Oxley Act (SOX) lead to improved audit quality in nonprofit hospitals. Unlike their for-profit counterparts, nonprofit organizations have been subject to audits of internal controls over financial reporting and program compliance for decades under Circular A-133 of the Single Audit Act of 1984, as amended. Circular A-133 audits represent the primary accountability tool over the billions of grant dollars awarded annually by the federal government. Despite the enormity of these awards and the substantial informational effect of the audit reports, prior empirical research suggests that the quality of these audits is problematic. </p><p> Using the archival data of nonprofit hospital Circular A-133 audits and related hand-collected financial data from IRS Form 990s, bivariate and multivariate analyses are conducted on a cross-sectional sample of 875 audits for 141 nonprofit hospitals with audits during both pre-SOX (2001-2004) and post-SOX (2008-2011) periods. Audit quality is inferred from discretionary accruals (Modified Jones model) and auditor-reported internal control deficiencies (reportable conditions and material weaknesses). </p><p> The results indicate support for improved audit quality from the pre- to the post-SOX period for all measures of audit quality. The results are different for the measures of audit quality used to examine the association between audit firm size and audit quality. Non-Big 4 audit firms experienced a significant improvement in audit quality when discretionary accruals are used as a proxy for audit quality. Conversely, Big 4 audit firms experienced a significant improvement in audit quality when internal control deficiencies are proxies for audit quality. In the post-SOX period audit firms provide approximately the same level of audit quality regardless of firm size when discretionary accruals or material weaknesses are the proxy for audit quality. When reportable conditions are the proxy, non-Big 4 firms have higher audit quality than Big 4 firms post-SOX. Client characteristics, specifically hospital size and the interaction of leverage and risk, are attributable to differences in post-SOX audit quality. Finally, the study fails to support the hypothesis that large audit firms self-select low risk clients.</p>

<p> Extant research indicates that earnings attributes are important considerations to corporate decision makers and users of accounting information (e.g., Francis et al., 2004). One such attribute is earnings quality; often measured as the magnitude of accruals that do not convert to cash in a timely manner, where a poor match of cash flows and accruals indicates low earnings quality (e.g., Dechow and Dichev, 2002). Such accruals could be used to manage earnings, a practice that aims to achieve a pre-determined level of earnings by using accounting techniques rather than actual firm performance. This study consists of two essays and examines the effect of earnings quality on two groups of financial statement users; specifically financial analysts and CEO compensation setters.</p><p> The first essay investigates the impact of earnings quality on earnings forecast accuracy, forecast dispersion, and forecast optimism of individual financial analysts. The primary model employed for analyst forecast accuracy is consistent with Barniv et al. (2005), Clement (1999), and Jacob et al. (1999). Further reduced model of forecast accuracy based on variables used by Bae et al. (2008) is also used. The forecast dispersion model is based on that of Behn (2008), and forecast optimism is measured following Cowen et al. (2006). The findings show that when earnings quality is higher, analyst forecasts exhibit greater accuracy and lower optimism. Higher earnings quality has some impact on forecast dispersion; however the affect largely disappears when correcting for correlation within firm clusters. </p><p> The second essay examines whether earnings quality plays a role in CEO compensation when corporate earnings satisfy (or fail to satisfy) the market's expectations. Specifically, Essay II examines CEO bonus as the measure of compensation used to reward the CEO for performance. Because such rewards are often accomplished with cash compensation, and because salary is usually set before the start of the year, the bonus portion of the CEO's total pay package is likely to be affected by earnings quality (Matsunaga and Park (2001). The results provide evidence that lower earnings quality is associated with higher CEO bonus compensation for firms that have satisfied market earnings expectations.</p>

<p>The financial crisis of 2007-2009 was one in which many financial services firms participated in shortsighted and unethical behavior. About $11 trillion in household wealth were lost, 26 million Americans lost their jobs, and 4.5 million could not afford their mortgages These events and statistics show the prevalent lack of ethical leadership in the financial services sector. The problem addressed in this study is the lack of leadership ethics and its relationship to organizational success within the financial services industry. The purpose of this quantitative correlational study was to determine the relationship and test the predictive strength between corporate supervisors' use of key ethical variables and organizational success. Responsibility, respect, fairness, and honesty were the predictor variables and organizational success was the criterion variable. One hundred and thirty six corporate supervisors from financial services sector in New York and Washington, D.C completed the survey questionnaires. The results of the study indicated that the four predictor variables have a significant and positive relationship with the criterion variable. The strongest relationship among the predictors and criterion variables were found between corporate supervisors' use of respect (r = 0.676, p< .001), corporate supervisors' use of honesty (r = 0.653, P<.001), followed by corporate supervisors' use of fairness (r = 0.589, P<.001), and corporate supervisors' use of responsibility (r = 0.577, p<.001). Additionally, the multiple linear regression analysis showed that that the variables were significant predictors of organizational success (R2 =0.525, F (4, 131) = 36.24, p< .001). The findings of the study concluded that ethical leadership is significantly related to organizational success. It contributed to the theoretical and operational knowledge within the fields of ethical leadership ,advancing the empirical and theoretical insight of the LMX theory, as well as providing new and pragmatic knowledge of the context of ethical leadership in the financial services industry Future research recommendations included (a) quantitative, study with a meta-analysis design,(b) an expansion of the target population beyond the financial services industry and (c) a phenomenology to explore lived experience of the variables in the study.

<p> I examine how managerial reputation affects the quality of non-GAAP earnings disclosures and how the market reacts to non-GAAP earnings disclosures associated with managerial reputation. Although there was an initial dip in the frequency of non-GAAP earnings disclosures after SOX and Regulation G, the frequency of non-GAAP earnings disclosures has increased in recent years (Brown, Christensen, Elliott and Mergenthaler 2012). Motivated by the efficient contracting theory and managerial reputation incentives, I investigate whether reputable managers are associated with higher quality non-GAAP earnings disclosures. I also investigate whether the market is more responsive to non-GAAP earnings disclosed by reputable managers. Using empirical models modified from prior research, I find that reputable managers are less likely to disclose non-GAAP earnings, which is consistent with the efficient contracting explanation. I also find that reputable managers exclude more recurring items that are related to future operating earnings when they disclose non-GAAP earnings, which is consistent with the rent extraction explanation in prior research. Finally, I find that managerial reputation has an incremental effect on the market reaction and that the market is more responsive to non-GAAP earnings disclosed by reputable managers if the unexpected earnings are positive. The study contributes to both non-GAAP earnings disclosures literature and managerial reputation incentives literature. It also has implications for investors, managers, and regulators.</p>

Thesis (Ph.D.)--University of Illinois at Urbana-Champaign, 2006. / Source: Dissertation Abstracts International, Volume: 68-02, Section: A, page: 0627. Adviser: A. Rashad Abdel-khalik. Includes bibliographical references (leaves 93-100) Available on microfilm from Pro Quest Information and Learning.

Thesis (Ph.D.)--Indiana University, Kelley School of Business, 2007. / Source: Dissertation Abstracts International, Volume: 68-09, Section: A, page: 3934. Adviser: Geoff Sprinkle. Title from dissertation home page (viewed May 8, 2008).

Thesis (Ph.D.)--Indiana University, Kelley School of Business, 2007. / Source: Dissertation Abstracts International, Volume: 68-09, Section: A, page: 3935. Adviser: M. Daniel Beneish. Title from dissertation home page (viewed May 8, 2008).

Thesis (Ph.D.)--University of Washington, 2007. / (UMI)AAI3265347. Source: Dissertation Abstracts International, Volume: 68-05, Section: A, page: 2035. Adviser: S. Jane Kennedy.