Real Earnings Management and Information Asymmetry in the Equity Market
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http://hdl.handle.net/10045/74792
Title: | Real Earnings Management and Information Asymmetry in the Equity Market |
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Authors: | Abad, David | Cutillas-Gomariz, M. Fuensanta | Sánchez-Ballesta, Juan P. | Yagüe, José |
Research Group/s: | Finanzas de Mercado y Econometría Financiera |
Center, Department or Service: | Universidad de Alicante. Departamento de Economía Financiera y Contabilidad |
Keywords: | Information Asymmetry | Real Earnings Management | Real Activities Manipulation | Discretionary Accruals |
Knowledge Area: | Economía Financiera y Contabilidad |
Issue Date: | 2018 |
Publisher: | Routledge |
Citation: | European Accounting Review. 2018, 27(2): 209-235. doi:10.1080/09638180.2016.1261720 |
Abstract: | The literature suggests that real earnings management (REM) activities can increase adverse selection risk in capital markets. Due to their opacity and the difficulties in understanding their implications, REM strategies may increase the level of information asymmetry among investors. This paper examines the association between earnings management through real activities manipulation and information asymmetry in the equity market. To estimate the level of adverse selection risk we use a comprehensive index of information asymmetry measures proposed by the market microstructure literature. For a sample of Spanish listed firms, we find that firms’ strategies of increasing earnings through REM are associated with higher information asymmetry in those firms that meet last year’s earnings. Our findings are consistent with the hypothesis that earnings management through real activities manipulation garbles the market, enhances private information production, and exacerbates information asymmetry in the stock market. |
Sponsor: | David Abad acknowledges financial support from the Ministerio de Economía y Competitividad through grants ECO2013-4409-P and ECO2014-58434-P. José Yagüe acknowledges financial support from Fundación Caja Murcia. |
URI: | http://hdl.handle.net/10045/74792 |
ISSN: | 0963-8180 (Print) | 1468-4497 (Online) |
DOI: | 10.1080/09638180.2016.1261720 |
Language: | eng |
Type: | info:eu-repo/semantics/article |
Rights: | © 2016 European Accounting Association |
Peer Review: | si |
Publisher version: | https://doi.org/10.1080/09638180.2016.1261720 |
Appears in Collections: | INV - Finanzas de Mercado y Econometría Financiera - Artículos de Revistas |
Files in This Item:
File | Description | Size | Format | |
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2018_Abad_etal_EuroAccountRev_final.pdf | Versión final (acceso restringido) | 555,47 kB | Adobe PDF | Open Request a copy |
2018_Abad_etal_EuroAccountRev_accepted.pdf | Accepted Manuscript (acceso abierto) | 1,11 MB | Adobe PDF | Open Preview |
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