The first and second authors are from Lancaster University. The third author is from Universidad de Valencia, Spain. They gratefully acknowledge the helpful comments and suggestions of an anonymous referee, Steve Young and Ken Peasnell. They acknowledge financial contribution from the Valencian Institute of Economic Research (IVIE), the Spanish Ministry of Science and Technology (SEC2002-04608-C02-01/2) and from the European Commission (HPRN CT 2000-00062). The paper has benefited from presentations at the 2003 AECA meeting; the accounting research workshop at the Amsterdam Graduate Business School; the workshop on empirical research on financial accounting at the University of Alicante, the EIASM workshop on capital market research in accounting at Goethe Universität Frankfurt am Main, the 2004 EAA Conference, the 2004 BAA Conference, a seminar at the University Carlos III Madrid, the 2004 JBFA annual Conference on capital markets and the 2004 AAA annual meeting. Juan Manuel García Lara acknowledges the financial contribution of Lancaster University Management School Pump Priming Research Grants, Lancaster University Small Grants Scheme (AFA7620), and the Nuffield Foundation, through their Small Grant Scheme (SGS/00963/G).
The Effect of Earnings Management on the Asymmetric Timeliness of Earnings
Article first published online: 20 APR 2005
Journal of Business Finance & Accounting
Volume 32, Issue 3-4, pages 691–726, April 2005
How to Cite
García Lara, J. M., García Osma, B. and Mora, A. (2005), The Effect of Earnings Management on the Asymmetric Timeliness of Earnings. Journal of Business Finance & Accounting, 32: 691–726. doi: 10.1111/j.0306-686X.2005.00610.x
- Issue published online: 20 APR 2005
- Article first published online: 20 APR 2005
- earnings management;
Abstract: Is earnings management affecting (driving) the measures of earnings conservatism?Ball et al. (2000) point out that the asymmetry in the recognition of good and bad news in earnings (faster recognition of bad news: earnings conservatism) is more pronounced in common-law than in code-law based accounting regimes. However, comparative studies on earnings conservatism in Europe have failed to identify significant differences between common-law and code-law based countries. We argue that in code-law based countries managers have incentives to reduce earnings consistently. This enhances the association between earnings and returns in bad news periods. We find that after controlling for discretionary accruals, the differential earnings response to bad news in Germany and France decreases significantly.