دانلود رایگان مقاله انگلیسی عملکرد یکپارچه و مدیریت درآمد - الزویر 2018

Abstract

This paper studies how peer performance affects firms’ earnings management decisions. Using peer firms’ idiosyncratic returns as an exogenous peer performance measure and the instrumental variable approach, we find that higher peer performance leads to higher discretionary accruals. This effect is salient for both industry leaders and followers and is robust to alternative discretionary accrual measures and alternative peer definitions. We examine two mechanisms through which peer performance affects firms’ earnings management. We find that analysts revise their earnings forecasts according to peer performance and that when peer performance is higher, firms are less likely to meet or beat analyst consensus without managing earnings. This evidence suggests a capital market pressure mechanism. In addition, the effect of peer performance is more pronounced in firms using relative performance evaluation, suggesting a compensation pressure mechanism. In sum, our evidence suggests that managers report opportunistically to match peer performance.

6. Conclusion

This study examines the role of peer performance in a firm’s earnings management behavior. Although theoretically intuitive, demonstrating its role is empirically challenging. Using a peer performance measure constructed from the idiosyncratic equity returns of peer firms and an instrumental variable based on the idiosyncratic equity returns of the major customers of peer firms, we alleviate the possible endogeneity concerns. We find that peers’ idiosyncratic performance plays an important role in a firm’s earnings management. In particular, we find that a firm’s discretionary accruals are positively correlated with peer performance. Further analysis reveals two important mechanisms of peer performance: capital market pressure and compensation pressure. We also find that peer performance is negatively associated with firms’ real expenditure such as R&D expenses. The evidence documented in this paper emphasizes the importance of peer performance in financial reporting and corporate governance.