Issues In Testing Earnings Management And An Instrumental Variable Approach

  title={Issues In Testing Earnings Management And An Instrumental Variable Approach},
  author={Sok-Hyon Kang and K. Sivaramakrishnan},
  journal={Journal of Accounting Research},
  • Sok-Hyon Kang, K. Sivaramakrishnan
  • Published 1995
  • Economics
  • Journal of Accounting Research
  • In empirical studies of earnings management (EMI), a central issue is the estimation of the managed component (discretionary accruals) when outsiders observe only the sum of the managed and unmanaged (nondiscretionary) accounting numbers. Important methodological issues arise in part because the variables most useful in predicting the unmanaged components are themselves accounting numbers which are likely to be affected by EM. In this paper, we propose a simple method of addressing some of… CONTINUE READING
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