Pre Managed Earnings Benchmarks and Earnings Management of Australian Firms

Authors

Lan Sun, University of New EnglandFollow
Subhrendu Rath, Curtin University, Australia

Abstract

This study investigates benchmark beating behaviour and circumstances under which managers inflate earnings to beat earnings benchmarks. We show that two benchmarks, positive earnings and positive earnings change, are associated with earnings manipulation. Using a sample of Australian firms from 2000 to 2006, we find that when the underlying earnings are negative or below prior year’s earnings, firms are more likely to use discretionary accruals to inflate earnings to beat benchmarks.

Recommended Citation

Sun, Lan and Rath, Subhrendu, Pre Managed Earnings Benchmarks and Earnings Management of Australian Firms, Australasian Accounting, Business and Finance Journal, 6(1), 2012, 29-56.