Executive Takeaways
■ Real Earnings Management (REM) is a common way of misleading investors. ■ Some suggest that greater management disclosure will mitigate the risk of REM. ■ We use an experiment to examine how management justification affects REM-type behavior. ■ We find justification increases REM-type behavior when uncertainty is high. ■ Management justification may not always be an effective way to reduce REM.
Hong Qu, Assistant Professor of Accounting Lucy F. Ackert, Professor of Finance Dana R. Hermanson, Dinos Eminent Scholar Chair of Private Enterprise and Professor of Accounting Velina K. Popova, Associate Professor of Accounting
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