• Title/Summary/Keyword: Signalling Earnings Management

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Real Earnings Management and Persistence of Firm Value: Evidence from India

  • POTHARLA, Srikanth;BHATTACHARJEE, Kaushik;SAMONTARAY, Durga Prasad
    • The Journal of Asian Finance, Economics and Business
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    • v.8 no.12
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    • pp.323-336
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    • 2021
  • The present study aims to examine the impact of real earnings management on the future value of the firm and its persistence. The study also tests suspect firm effects on the relationship between real earnings management and the future value of the firm. The sample of the present study consists of all listed non-financial firms from the year 2011 to 2018. Real earnings management has been measured in three alternative ways viz., abnormal operating cash flows, abnormal discretionary spending, and abnormal production cost. Tobin's Q is used as a measure of firm value. The interaction term of real earnings management and Tobin's Q is used to test firm value persistence. The results of the analysis disclose that out of three measures of real earnings management, abnormal reduction in discretionary spending only has a significant negative impact on the persistence of firm value. Moreover, the suspect firm analysis reveals that when the underlying motive of real earnings management is to meet zero earnings, both abnormal increases in operating cash flows and abnormal reduction in discretionary spending have a significant negative impact on firm value persistence.

The Effect of Analysts' Earnings Forecasts Following Dividend Announcements on Stock Returns (배당공시이후 애널리스트 이익추정치 발표가 주가에 미치는영향)

  • Hong, Chun-Uk;Lee, Seong-Hyo;Kim, Kyung-Ihl
    • Journal of Convergence for Information Technology
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    • v.7 no.3
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    • pp.105-109
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    • 2017
  • This paper examines the effect of the analysts' earnings forecast revisions on stock price after the dividend announcement of the firms has been released. We show that the analysts' upward revisions on earnings forecasts are followed by the positive cumulative abnormal return. We also investigate the signalling effect and the confirmation effect with respect to the effect of the dividend announcement and the earnings forecast revisions on stock price. The test results show that the confirmation effect is stronger than the signalling effect. That is, the investors react only when the analysts' forecasts coincide with the preceding dividend announcement.