季度收入模式和盈余管理【外文翻译】

外文文献翻译

原文：

Quarterly Earnings Patterns and Earnings Management Empirical evidence suggests that firms manage earnings to avoid reporting losses or earnings decreases or to meet analysts' expectations. If firms manage earnings to meet or beat a target number, adjustments to earnings are likely to be made when the excess or shortfall from the target becomes known. Hence, the timing of manipulation is likely to be a critical distinguishing feature that could provide a means to detect such target management behavior. Consistent with this view, investment experts caution investors to watch out for late-year surges in revenues and earnings, which they regard as telltale signs of earnings manipulation. Articles in the business press dating back to the 1990s cite cases of technology companies reporting disproportionate increases in revenues and earnings in the fourth quarter. In this paper, we exploit the timing constraint on a firm's ability to manage to a target and examine whether the pattern of quarterly earnings can provide an indication of potential earnings management.

Our focus on potential earnings management in the fourth quarter implicitly suggests that managers have greater incentives to manage annual rather than quarterly results. In support of our assumption, most accounting-based performance measures used in bonus and compensation schemes are based on audited annual earnings. Also, if capital market participants perceive audited annual earnings as more credible than interim earnings, they may place a higher value on annual earnings, providing managers with stronger incentives to manipulate annual earnings. Thus, although managers may have greater opportunities to manipulate interim earnings because of the absence of an independent audit, their incentives to manage earnings in interim quarters may be weaker.

The vast literature on earnings management relies on an accrual expectation model to estimate abnormal or discretionary accruals. Empirical studies typically identify a sample for which the direction of earnings management is predicted and then test whether the abnormal accruals of the sample suspected of earnings management are higher or lower than some benchmark. The inherent difficulty in modeling accruals leads to model misspecification and low power tests resulting in serious inference problems. Thus, there

appears to be a need to explore alternative approaches to detect earnings management.

If quarterly earnings reversals indeed reflect earnings management behavior, this approach can potentially provide us with an alternative detection tool. Examining earnings patterns of a firm over time avoids the specification of expected (or normal) accruals. This quarterly time-series approach uses a firm as its own control and can be used to detect earnings management by any firm, including those where the motivation to manage is not obvious. Of course, a limitation of this approach is that it is useful only in detecting cases where firms time the earnings management effort.

We test whether the observed frequency of fourth-quarter reversals is significantly higher than expected. We use a sequence of four quarters with randomly designated interim and fourth quarters and different sequences of four quarters ending in a quarter other than the fiscal fourth quarter as alternative benchmarks for the expected frequency of reversals. On the basis of these benchmarks, we find that the occurrence of reversals in the fiscal fourth quarter is significantly greater than would be expected by chance.

In summary, our results indicate that reversals of fourth-quarter earnings occur in a significant percentage of firms. Whether this reversal phenomenon is indeed a manifestation of earnings management behavior is difficult to determine definitively. Our goal is not to provide incontrovertible evidence of earnings management by the reversal firms but to test the earnings management hypothesis along a number of dimensions. Numerous indicators support our hypothesis that firms with reversals are more likely than others to have managed their earnings. Our results focus on the sample average and hence do not imply that all firms in the reversal samples engage in earnings management. The weight of our evidence raises a strong suspicion that, on average, fourth-quarter reversals reflect earnings management behavior.

Overall, our paper contributes to the earnings management literature in general and has specific implications for the target-meeting or -beating literature. Our findings suggest that investors should view late-year changes in general and fourth-quarter earnings reversals in particular with caution. On the basis of our evidence, the fourth-quarter reversal pattern can be used as a heuristic that triggers an inquiry into potential earnings management in conjunction with other indicators, such as discretionary accruals or meeting or beating earnings targets.