دانلود رایگان مقاله انگلیسی حساس بودن مدیریت درآمد به نرخ تخفیف - الزویر 2018

ABSTRACT

We argue that managers’ choice to manage earnings depends on the trade-off in the present value of expected future net benefits associated with that choice. Specifically, we examine if discount rates are associated with the likelihood that managers engage in earnings management to meet or beat various earnings targets. We find that discount rates are positively associated with incomeincreasing earnings management. This means that managers increase both accrual-based and real earnings management when discount rates are higher. However, the economic magnitude of this association is relatively moderate.

8. Conclusion

We examine the association between discount rates and income-increasing earnings management. We expect that higher discount rates reduce the present value of managing earnings less than the present value of not managing earnings. Consequently, this increases the likelihood of earnings management either through accruals or real operating activities. In certain incentive settings, we find positive and significant associations between the proxy for managers’ discount rates and income-increasing earnings management. The increase in earnings management is prevalent both for accrual-based earnings management and real earnings management. Specifically, our estimations suggest that a one percentage-point increase in the discount rate is associated with an economically moderate increase of about 0.14 percentage-points of total assets through accrual-based earnings management and 0.23 percentage-points of total assets through real earnings management.

We acknowledge that this analysis is somewhat tentative. Our analysis offers conjectures that would need to be extended in future research. The analysis considers simplified theoretical and empirical models and simplified proxies of managers’ discount rates. This paper does not consider managers’ apprehension rates of extensive earnings management. However, we demonstrate that one cannot rule out the possibility that the present value aspect matters in managers’ decisions to use earnings management. In this regard, we find support for our notion that when managers have reason to discount the future more severely, the use of income-increasing earnings management increases.