SEPTIAN BAYU K. (0806479080) Detecting Earnings Management Dechow, Sloan, Sweeney (1995)
-
Upload
kory-hopkins -
Category
Documents
-
view
212 -
download
0
Transcript of SEPTIAN BAYU K. (0806479080) Detecting Earnings Management Dechow, Sloan, Sweeney (1995)
![Page 1: SEPTIAN BAYU K. (0806479080) Detecting Earnings Management Dechow, Sloan, Sweeney (1995)](https://reader036.fdocuments.in/reader036/viewer/2022070415/5697bfa81a28abf838c99884/html5/thumbnails/1.jpg)
SEPTIAN BAYU K. (0806479080)
Detecting Earnings Management
Dechow, Sloan, Sweeney (1995)
![Page 2: SEPTIAN BAYU K. (0806479080) Detecting Earnings Management Dechow, Sloan, Sweeney (1995)](https://reader036.fdocuments.in/reader036/viewer/2022070415/5697bfa81a28abf838c99884/html5/thumbnails/2.jpg)
Outline
IntroductionStatistical BackgroundMeasuring DAExperimental DesignData AnalysisEmpirical ResultsConclusionsImplications
![Page 3: SEPTIAN BAYU K. (0806479080) Detecting Earnings Management Dechow, Sloan, Sweeney (1995)](https://reader036.fdocuments.in/reader036/viewer/2022070415/5697bfa81a28abf838c99884/html5/thumbnails/3.jpg)
Introduction (1)
Analysis of earnings management focuses on discretionally accruals (DA) Separate total accruals to DA & NDA
The aim of research Finding the sophisticated model(s) to measure to
detect earnings management with DA/NDA
Research gap Modified Jones Model
![Page 4: SEPTIAN BAYU K. (0806479080) Detecting Earnings Management Dechow, Sloan, Sweeney (1995)](https://reader036.fdocuments.in/reader036/viewer/2022070415/5697bfa81a28abf838c99884/html5/thumbnails/4.jpg)
Introduction (2)
Prior research DA: Healy (1995), DeAngelo (1996), Jones (1991) Accounting procedure changes: Healy (1985), Healy &
Palepu (1990), Sweeney (1994) Specific components of DA: McNichols & Wilson
(1988), DeAngelo et al (1994) Components of Discretionary Cash Flow (Dechow &
Sloan (1991)
![Page 5: SEPTIAN BAYU K. (0806479080) Detecting Earnings Management Dechow, Sloan, Sweeney (1995)](https://reader036.fdocuments.in/reader036/viewer/2022070415/5697bfa81a28abf838c99884/html5/thumbnails/5.jpg)
Statistical Background
McNichols & Wilson (1988)
Problems: Incorrectly attributing earnings management to
PART Unintentionally extracting earnings management
caused by PART Low power test
![Page 6: SEPTIAN BAYU K. (0806479080) Detecting Earnings Management Dechow, Sloan, Sweeney (1995)](https://reader036.fdocuments.in/reader036/viewer/2022070415/5697bfa81a28abf838c99884/html5/thumbnails/6.jpg)
Measuring DA (1)
The Healy model (Healy, 1985)
The DeAngelo model (DeAngelo, 1986) NDAτ = TAτ-1
The Jones model (Jones, 1991)
![Page 7: SEPTIAN BAYU K. (0806479080) Detecting Earnings Management Dechow, Sloan, Sweeney (1995)](https://reader036.fdocuments.in/reader036/viewer/2022070415/5697bfa81a28abf838c99884/html5/thumbnails/7.jpg)
Measuring DA (2)
The Modified Jones model
The Industry model (Dechow & Sloan, 1991) NDA τ = γ1 + γ2 median1 (TA τ)
![Page 8: SEPTIAN BAYU K. (0806479080) Detecting Earnings Management Dechow, Sloan, Sweeney (1995)](https://reader036.fdocuments.in/reader036/viewer/2022070415/5697bfa81a28abf838c99884/html5/thumbnails/8.jpg)
Experimental Design
Randomly 1000 firm-years (1950-1991)Firm-years experiencing extreme financial
performanceFirm-years with accrual manipulation
Expense manipulation Revenue manipulation Margin manipulation
32 firms that are subject to SEC enforcement actions
![Page 9: SEPTIAN BAYU K. (0806479080) Detecting Earnings Management Dechow, Sloan, Sweeney (1995)](https://reader036.fdocuments.in/reader036/viewer/2022070415/5697bfa81a28abf838c99884/html5/thumbnails/9.jpg)
Data Analysis
Total accruals (TA)
CFO = Earnings – TA Using Z-statistic
![Page 10: SEPTIAN BAYU K. (0806479080) Detecting Earnings Management Dechow, Sloan, Sweeney (1995)](https://reader036.fdocuments.in/reader036/viewer/2022070415/5697bfa81a28abf838c99884/html5/thumbnails/10.jpg)
Empirical Results
Random sample of firm-years Table 1, table 2
Samples of firm-years experiencing extreme financial performance Figure 1, table 3, figure 2, table 4
Samples of firm-years with artificially induced earnings management Figure 3, figure 4
Sample of firm-years in which of the SEC alleges earnings are overstated Figure 5, table 5, table 6, table 7
![Page 11: SEPTIAN BAYU K. (0806479080) Detecting Earnings Management Dechow, Sloan, Sweeney (1995)](https://reader036.fdocuments.in/reader036/viewer/2022070415/5697bfa81a28abf838c99884/html5/thumbnails/11.jpg)
![Page 12: SEPTIAN BAYU K. (0806479080) Detecting Earnings Management Dechow, Sloan, Sweeney (1995)](https://reader036.fdocuments.in/reader036/viewer/2022070415/5697bfa81a28abf838c99884/html5/thumbnails/12.jpg)
![Page 13: SEPTIAN BAYU K. (0806479080) Detecting Earnings Management Dechow, Sloan, Sweeney (1995)](https://reader036.fdocuments.in/reader036/viewer/2022070415/5697bfa81a28abf838c99884/html5/thumbnails/13.jpg)
![Page 14: SEPTIAN BAYU K. (0806479080) Detecting Earnings Management Dechow, Sloan, Sweeney (1995)](https://reader036.fdocuments.in/reader036/viewer/2022070415/5697bfa81a28abf838c99884/html5/thumbnails/14.jpg)
![Page 15: SEPTIAN BAYU K. (0806479080) Detecting Earnings Management Dechow, Sloan, Sweeney (1995)](https://reader036.fdocuments.in/reader036/viewer/2022070415/5697bfa81a28abf838c99884/html5/thumbnails/15.jpg)
![Page 16: SEPTIAN BAYU K. (0806479080) Detecting Earnings Management Dechow, Sloan, Sweeney (1995)](https://reader036.fdocuments.in/reader036/viewer/2022070415/5697bfa81a28abf838c99884/html5/thumbnails/16.jpg)
![Page 17: SEPTIAN BAYU K. (0806479080) Detecting Earnings Management Dechow, Sloan, Sweeney (1995)](https://reader036.fdocuments.in/reader036/viewer/2022070415/5697bfa81a28abf838c99884/html5/thumbnails/17.jpg)
![Page 18: SEPTIAN BAYU K. (0806479080) Detecting Earnings Management Dechow, Sloan, Sweeney (1995)](https://reader036.fdocuments.in/reader036/viewer/2022070415/5697bfa81a28abf838c99884/html5/thumbnails/18.jpg)
![Page 19: SEPTIAN BAYU K. (0806479080) Detecting Earnings Management Dechow, Sloan, Sweeney (1995)](https://reader036.fdocuments.in/reader036/viewer/2022070415/5697bfa81a28abf838c99884/html5/thumbnails/19.jpg)
![Page 20: SEPTIAN BAYU K. (0806479080) Detecting Earnings Management Dechow, Sloan, Sweeney (1995)](https://reader036.fdocuments.in/reader036/viewer/2022070415/5697bfa81a28abf838c99884/html5/thumbnails/20.jpg)
![Page 21: SEPTIAN BAYU K. (0806479080) Detecting Earnings Management Dechow, Sloan, Sweeney (1995)](https://reader036.fdocuments.in/reader036/viewer/2022070415/5697bfa81a28abf838c99884/html5/thumbnails/21.jpg)
![Page 22: SEPTIAN BAYU K. (0806479080) Detecting Earnings Management Dechow, Sloan, Sweeney (1995)](https://reader036.fdocuments.in/reader036/viewer/2022070415/5697bfa81a28abf838c99884/html5/thumbnails/22.jpg)
![Page 23: SEPTIAN BAYU K. (0806479080) Detecting Earnings Management Dechow, Sloan, Sweeney (1995)](https://reader036.fdocuments.in/reader036/viewer/2022070415/5697bfa81a28abf838c99884/html5/thumbnails/23.jpg)
![Page 24: SEPTIAN BAYU K. (0806479080) Detecting Earnings Management Dechow, Sloan, Sweeney (1995)](https://reader036.fdocuments.in/reader036/viewer/2022070415/5697bfa81a28abf838c99884/html5/thumbnails/24.jpg)
![Page 25: SEPTIAN BAYU K. (0806479080) Detecting Earnings Management Dechow, Sloan, Sweeney (1995)](https://reader036.fdocuments.in/reader036/viewer/2022070415/5697bfa81a28abf838c99884/html5/thumbnails/25.jpg)
![Page 26: SEPTIAN BAYU K. (0806479080) Detecting Earnings Management Dechow, Sloan, Sweeney (1995)](https://reader036.fdocuments.in/reader036/viewer/2022070415/5697bfa81a28abf838c99884/html5/thumbnails/26.jpg)
Conclusions
All of models appear well specified when applied to random sample of the firm-years
The models all generate test of low power of earnings management
All models reject the null hypothesis of no earnings management
Modified Jones model generate the revenue –based earnings management
![Page 27: SEPTIAN BAYU K. (0806479080) Detecting Earnings Management Dechow, Sloan, Sweeney (1995)](https://reader036.fdocuments.in/reader036/viewer/2022070415/5697bfa81a28abf838c99884/html5/thumbnails/27.jpg)
Implications
Regardless of the model used to detect earnings management Further research: develop new model with more
powerful test to detect earnings management
Correlation between PART ad firm performance, considered the models
Consider about earnings management context