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dc.contributor.authorHansen, James Charles
dc.description.abstractChapter 1 examines the earnings management around earnings benchmark literature. The earnings benchmarks are the earnings level (loss avoidance), earnings changes (earnings improvement), and the analyst forecast benchmark. Chapter 1 documents (1) that firms’ management have incentives to meet or beat the three earnings benchmarks, (2) methods firms’ management are using to manage earnings to beat these benchmarks, (3) whether the market sees through earnings management to beat benchmarks, (4) and which benchmarks are the most important to firms. Chapter 1 also presents avenues for future research. Chapter 2 examines whether firms just above and just below the three earnings benchmarks have differing levels of discretionary accruals. If discretionary accruals are a measure of earnings management, then firms above (benchmark beaters) and firms below a benchmark should have differing levels of discretionary accruals. I find that after I remove firms with incentives to beat an alternative benchmark from the firms that just missed the loss avoidance benchmark, firms just above the benchmark have significantly higher discretionary accruals. I find similar results for the earnings changes and analyst forecast benchmarks. Chapter 3 asks why there are so many firms just below an earnings benchmark, assuming firms have incentives to beat a benchmark. This chapter examines whether firms just above and just below the three earnings benchmarks have differing levels of flexibility and market sensitivity to earnings announcements. I use net operating assets (NOA) and change in total accruals (?TACC) to proxy for a firm’s ability or flexibility to manage earnings. I use the earnings response coefficient (ERC) and analysts’ stock recommendations to proxy for a firm’s incentives to beat a threshold. I hypothesize that firms above a threshold will have beginning-of-the-year levels of NOA and ?TACC that are lower than firms below a threshold (Flexibility Hypothesis). I hypothesize that firms above a threshold will have higher ERCs and overall stock recommendations (high = buy recommendations) than firms below a threshold (Market Sensitivity Hypothesis). Results support the flexibility hypothesis using NOA, when I limit the sample of firms above a benchmark to potential earnings managers. Results support the market sensitivity hypothesis using analyst stock recommendations.
dc.subjectAbnormal accruals
dc.subjectdiscretionary accruals
dc.subjectearnings benchmarks
dc.subjectearnings management
dc.subjectearnings management constraints
dc.subjectearnings thresholds
dc.subjectmarket sensitivity to earnings announcements
dc.titleEarnings management around earnings benchmarks
dc.description.advisorKenneth Gaver
dc.description.committeeKenneth Gaver
dc.description.committeeBen Ayers
dc.description.committeeLinda Bamber
dc.description.committeeJennifer Gaver

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