دانلود رایگان مقاله انگلیسی چگونه درآمد عمدی با توجه به توانایی مدیریتی خنثی می شود؟ - Sage 2017

Abstract

We investigate if high-ability managers are more likely to intentionally smooth earnings, a form of earnings management, and when they are more likely to do so. Although prior studies provide evidence that high-ability managers report higher quality earnings, the literature does not indicate whether this behavior is common because of (or happens in spite of) high-ability managers’ intentional smoothing activities. We find that (a) high-ability managers are significantly more likely to engage in intentional smoothing, (b) their intentional smoothing is associated with improved future operating performance, and (c) their intentional smoothing is more prevalent when the smoothing either benefits shareholders, the manager, or both. We do not, however, find evidence that high-ability managers who smooth are more likely to have engaged in informed trading or are more likely to consume perquisites. High-ability managers’ intentional smoothing is also associated with increased voluntary (but not forced) executive turnover, consistent with high-ability managers being motivated, at least in part, by how the capital market consequences of smoothing are expected to benefit shareholders, thereby bolstering their reputation.

Conclusion

We investigate whether high-ability managers are more likely to intentionally smooth earnings, a form of earnings management, and when they are more likely to do so. Our evidence indicates that high-ability managers are, on average, more likely to intentionally smooth earnings. The results also suggest that high-ability managers more effectively implement intentional smoothing strategies: We find that firms with high-ability managers experience incrementally superior earnings performance in the periods following intentional smoothing. Finally, we examine specific incentives related to smoothing, including those that benefit all shareholders (e.g., avoiding debt covenant violations, meeting or beating earnings benchmarks) and those that benefit the manager alone (e.g., perquisite consumption or informed trading).

Our results reveal that high-ability managers smooth earnings when it benefits all shareholders but do not smooth earnings solely for their own personal benefit. Our results offer insights into the two opposing viewpoints of earnings smoothing, whether it is beneficial or detrimental to shareholders. Our evidence is consistent with high-ability managers deploying their superior skill to report an earnings stream that avoids various reporting pitfalls to benefit all shareholders. We interpret these results as evidence that, when executed by a manager, intentional earnings smoothing can be viewed as a beneficial activity by managers. There are, however, limits to the inferences that can be drawn from this study. First, to appropriately test our hypotheses, we utilize a sample without executive turnover over the period that we measure intentional smoothing and with sufficient data to calculate our control variables. This process results in a sample of large, wellgoverned firms. The extent to which our results extend to smaller firms with less sophisticated governance systems is unclear but might be fruitful ground for future research. Second, we cannot observe managers’ intentions in making reporting choices; we can only infer intention from observed behavior. It is thus possible that measurement error or omitted factors could allow different conclusions to be drawn from our evidence (e.g., compensation structure might vary with managerial ability and influence smoothing; Dhole et al., 2016). This being said, we believe the results of our tests (and particularly the results related to incentives) point to intentional smoothing by high-ability managers as providing benefits to shareholders.