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The effect of investor sentiment on the means of earnings management

Title
The effect of investor sentiment on the means of earnings management
Authors
Park S.
Ewha Authors
박소라
SCOPUS Author ID
박소라scopus
Issue Date
2018
Journal Title
Investment Management and Financial Innovations
ISSN
1810-4967JCR Link
Citation
Investment Management and Financial Innovations vol. 15, no. 1, pp. 10 - 17
Keywords
Discretionary accrualsEarnings managementInvestor sentimentReal earnings management
Publisher
LLC CPC Business Perspectives
Indexed
SCOPUS scopus
Document Type
Article
Abstract
Prior research has shown that a firm's tendency to meet or beat earning targets is greater during bad economic times than good times. The paper extends this line of research by investigating which means of earnings management is used in different states of economy. A sample of non-financial companies listed on Korea Securities Market from 2003 to 2011 is used for empirical tests. The findings of this study are summarized as follows. The magnitude of discretionary accruals is negatively related to investment sentiment, indicating that firms tend to use positive discretionary accruals to manipulate reported income upward when the sentiment is pessimistic. However, the real activity based earnings management is not significantly associated with the state of economy. Collectively, this study contributes to behavioral finance and accounting literature by suggesting that managers use discretionary portion of accruals, but do not change their real operating activities, in order to meet or beat earnings targets in economic downturn. © Sorah Park, 2018.
DOI
10.21511/imfi.15(1).2018.02
Appears in Collections:
경영대학 > 경영학전공 > Journal papers
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