Asia-Pacific Journal of Business (아태비즈니스연구)

KNU The Institute of Management & Economy Research (강원대학교 경영경제연구소)
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The Impact of Reversal in Accounting Earnings Signs Based on Preliminary Earnings Announcements on Real Earnings Management

기업의 잠정실적 부호전환이 실제이익조정에 미치는 영향

  • Seung-Jun Kim (Department of Global business, Anyang University) ;
  • Sung-Jong Park (School of Law & Business Administration, Hankyong National University)
  • 김승준 (안양대학교 글로벌 경영학과 ) ;
  • 박성종 (한경국립대학교 법경영학부 )
  • Received : 2024.08.30
  • Accepted : 2024.09.25
  • Published : 2024.09.30
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Abstract

Purpose - This study investigates whether firms engage in Real Earnings Management surrounding preliminary earnings announcements when experiencing a reversal of accounting earnings signs. Design/methodology/approach - We use ordinary least squares regression analysis to examine the association between the reversal of accounting earnings signs and three measures of REM(abnormal operating cash flows, abnormal discretionary expenses, and abnormal production costs). Findings - Our findings indicate that both profit-to-loss and loss-to-profit reversals are positively associated with all three measures of REM. This suggests that managers use various REM activities to mitigate negative consequences or enhance positive perceptions associated with earnings reversals. Research implications or Originality - This study provides new insights into the relationship between preliminary earnings announcements and REM by documenting that the reversal of accounting earnings signs is a significant determinant of managers' REM decisions. Our findings highlight the importance of scrutinizing REM activities surrounding preliminary earnings announcements, particularly when firms experience a reversal of accounting earnings signs.

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References

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