On the Association between Voluntary Disclosure and Earnings Management

1999/01/01 by Ron Kasznik · 1,264 citations
Business, Management and Accounting · Economics, Econometrics and Finance · Psychology · #Accounting #Actuarial science #Association (psychology) #Auditing, Earnings Management, Governance #Business #Earnings #Earnings management #Econometrics #Economics #Financial Markets and Investment Strategies #Financial Reporting and Valuation Research #Forecast error #Psychology #Reputation #Turnover #Voluntary disclosure

paper · doi:10.2307/2491396

published in Journal of Accounting Research 37(1), 57 (Wiley)

openalex publication_date 1999/01/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/31

Abstract

This study investigates whether managers who issue annual earnings forecasts manage reported earnings toward their forecasts, fearing legal actions by investors and loss of reputation for accuracy. I hypothesize that managers make income-increasing (decreasing) accounting decisions when earnings would otherwise be below (above) management forecasts, and that the earnings management activity is increasing in expected forecast error costs.1 These costs are likely higher for overestimates than for underestimates and are increasing in the magnitude of the forecast

Citations

• Disclosure level and the cost of equity capital.

Cited by

• Voluntary Disclosure, Earnings Quality, and Cost of Capital
• The Use of Unsigned Earnings Quality Measures in Tests of Earnings Management
• Accrual-based and real earnings management activities around seasoned equity offerings
• On the use of instrumental variables in accounting research
• Internal control and management guidance
• CEO Overconfidence and Management Forecasting
• China's Anti‐Corruption Campaign and Financial Reporting Quality
• Understanding earnings quality: A review of the proxies, their determinants and their consequences
• The financial reporting environment: Review of the recent literature
• Performance matched discretionary accrual measures
• Earnings management through real activities manipulation
• Financial reporting quality, debt maturity and investment efficiency
• Using corporate social responsibility performance to evaluate financial disclosure credibility
• Earnings management in socially responsible firms around seasoned equity offerings: Evidence from France, Germany, Italy and Spain. [europepmc]

Related

• Earnings Management to Exceed Thresholds
• Does Earnings Management Affect Firms’ Investment Decisions?
• THE ROLE OF EARNINGS MANAGEMENT AND TAXATION IN FINANCIAL REPORTING QUALITY
• How Are Earnings Managed? An Examination of Specific Accruals*
• Earnings Management? The Shapes of the Frequency Distributions of Earnings Metrics Are Not Evidence Ipso Facto