Earnings Management to Avoid Earnings Declines across Publicly and Privately Held Banks

Accounting Review - Tập 77 Số 3 - Trang 547-570 - 2002
Anne Beatty1, Bin Ke1, Kathy R. Petroni2
1Pennsylvania State University
2Michigan State University

Tóm tắt

This study compares samples of publicly and privately held bank holding companies to examine whether the high frequency of small earnings increases relative to small earnings decreases reported by public firms is attributable to earnings management. We expect public banks' shareholders to be more likely than private banks' shareholders to rely on simple earnings-based heuristics in evaluating firm performance, so we expect public banks to have more incentives to report steadily increasing earnings. Consistent with this expectation, we find that relative to private banks, public banks: (1) report fewer small earnings declines, (2) are more likely to use the loan loss provision and security gain realizations to eliminate small earnings decreases, and (3) report longer strings of consecutive earnings increases. These results suggest that the asymmetric pattern of more small earnings increases than decreases, first documented by Burgstahler and Dichev (1997), is attributable to earnings management and is not simply a reflection of the underlying distribution of earnings changes.

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Accounting Review

Tập 77 Số 3

547-570

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