Do firms prefer one form of accounting gimmick over other to meet peer performance?

Bansal, Manish (2021) Do firms prefer one form of accounting gimmick over other to meet peer performance? Asian Journal of Accounting and Governance, 16 . pp. 23-35. ISSN 2180-3838

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Official URL: https://ejournal.ukm.my/ajac/issue/view/1432

Abstract

The current study explores whether firms engage in classification shifting to meet industry-average profitability. The study examines the different alternatives under classification shifting for meeting industry numbers. Based on a sample of 15,616 firm-years, results exhibit that firms misclassify the cost of goods sold as a non-operating expense to meet the industry’s average gross margin ratio. Further empirical evidence provides that firms prefer shifting expenses over shifting revenues to meet the industry’s average profitability. Overall, results imply that peer performance is an important benchmark, and firms strive to achieve the same by engaging in different shifting strategies. The study is among the pioneering attempts that document a form of classification shifting where gross profit and core earnings both change as an effect of misclassification. The findings have important implications for auditors, investors, and analysts.

Item Type:Article
Keywords:Earnings management; Classification shifting; Revenue misclassification; Expense misclassification; Industry profitability
Journal:Asian Journal of Accounting and Governance
ID Code:17928
Deposited By: ms aida -
Deposited On:11 Jan 2022 01:28
Last Modified:13 Jan 2022 03:28

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