We examine the effect of stock liquidity on accruals-based earnings management. Finance literature suggests that stock liquidity leads to price efficiency. If prices are efficient, more future earnings should be reflected in current prices. Therefore, gain from shifting accruals across periods should be low and managers should have less incentive to manage earnings. We find that higher stock liquidity is associated with higher future earnings response coefficient and lower accruals-based earnings management. Our finding has important implication for the decline in accruals-based earnings management during 2001-2005 documented in prior study. Our additional trend analysis suggests that instead of SOX and other concurrent events, price efficiency improvement resulting from microstructure regime shifting (e.g., reduction in tick size from $1/16 to $1/100) may drive the decline in accruals-based earnings management during the period of 2001-2005.
| Identifer | oai:union.ndltd.org:LSU/oai:etd.lsu.edu:etd-06212012-212936 |
| Date | 28 June 2012 |
| Creators | Fang, Jing |
| Contributors | Lin, Ji-Chai, Cheng, C.S. Agnes, Hollie, Dana, Legoria, Joseph |
| Publisher | LSU |
| Source Sets | Louisiana State University |
| Language | English |
| Detected Language | English |
| Type | text |
| Format | application/pdf |
| Source | http://etd.lsu.edu/docs/available/etd-06212012-212936/ |
| Rights | unrestricted, I hereby certify that, if appropriate, I have obtained and attached herein a written permission statement from the owner(s) of each third party copyrighted matter to be included in my thesis, dissertation, or project report, allowing distribution as specified below. I certify that the version I submitted is the same as that approved by my advisory committee. I hereby grant to LSU or its agents the non-exclusive license to archive and make accessible, under the conditions specified below and in appropriate University policies, my thesis, dissertation, or project report in whole or in part in all forms of media, now or hereafter known. I retain all other ownership rights to the copyright of the thesis, dissertation or project report. I also retain the right to use in future works (such as articles or books) all or part of this thesis, dissertation, or project report. |
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