2005 Fiscal Year Final Research Report Summary
The effects of accounting regulations on financial statement quality and earnings management : A theory and tests
| Project/Area Number |
16530303
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| Research Category |
Grant-in-Aid for Scientific Research (C)
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| Allocation Type | Single-year Grants |
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| Section | 一般 |
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| Research Field |
Accounting
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| Research Institution | Waseda University |
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Principal Investigator |
USUI Akira Waseda University, Faculty of Commerce, Professor, 商学学術院, 教授 (90193870)
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| Project Period (FY) |
2004 – 2005
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| Keywords | quality of financial statements / persistence of earnings / persistence of accruals |
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| Research Abstract |
This project examines the relation between accrual reliability and earnings persistence, using a large sample of listed firms in 1965-2004. The results show that the accrual component of earnings is overestimated. The accrual component is less reliable than the cash flow component. Accrual categories, the change in non-cash working capital, the net non-current operating assets and the change in net financial assets, are overestimated. In this period, the persistence of earnings is decreasing. The change in non-cash working capital and the net non-current operating assets are less persistent than the cash flow component. The accrual reliability may be related to earnings management. Earnings management, using operating assets and/or debts, causes a serious problem. Accounting regulations are minimum standards which require the minimum level of information reliability. High reliability accounting information induces investors' information acquisitions, and market efficiency. However, a policy maker requires more reliable accounting information, and the costs are socially increasing. In the cost-benefit view, the level of reliably should be determined.
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Research Products
(8 results)
