Theses and Dissertations from UMD

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New submissions to the thesis/dissertation collections are added automatically as they are received from the Graduate School. Currently, the Graduate School deposits all theses and dissertations from a given semester after the official graduation date. This means that there may be up to a 4 month delay in the appearance of a give thesis/dissertation in DRUM

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Subject: search.filters.subject.Earnings Management

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    The Impact of Earnings Manipulation on the Science and Practice of Strategic Management
    (2021) Gibbs, Ralph Anthony; Waguespack, David; Agarwal, Rajshree; Business and Management: Management & Organization; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
    Strategic management research frequently seeks to explain variation in organizational performance using metrics such as accounting profits scaled by firm assets (ROA). Essay 1 addresses a concern with such accrual-based accounting methods—perhaps best illustrated by a large discontinuity in the distribution of ROA around zero for U.S. public firms—that operational and accounting practices will artificially inflate/deflate accounting profit. The essay establishes that such earnings management is common, introduces non-classical noise, and distorts our understanding of broad drivers of firm performance. It concludes with an analysis showing that an alternative performance measure, Cash Flows from Operations on Assets (OCFOA), offers a robust vehicle for checking results using accounting profits. Essay 2 addresses a core prediction of the behavioral theory of the firm—that a firm is more likely to engage in strategic change when its performance falls short of its aspirations. If a firm manipulates income to report above aspirations when otherwise it would have fallen short, this creates a theoretical tension—does the firm engage in strategic change or not? This study utilizes two instrumental variables for a firm’s capability to smooth earnings to analyze the linkage between earnings smoothing and strategic change. The results suggest that public firms actively smoothing earnings have a lower propensity to subsequently change the firm’s major resource allocations, and that avoiding reporting performance below aspirations is a mechanism through which this may occur.
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    An Alternative Measure to Detect Intentional Earnings Management through Discretionary Accruals
    (2005-06-10) Ibrahim, Salma Samir; Kim, Oliver; Accounting and Information Assurance; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
    This study proposes an alternative measure of discretionary accruals that can be used in testing for intentional earnings management. Prior research has shown the prevalence of measurement error in all models used to estimate discretionary accruals (Healy (1985), DeAngelo (1986), Jones (1991) and modified Jones models (Dechow et al., 1995). The alternative measure proposed relies on the premise that managers use one or more components of accruals (accounts receivable, inventories, accounts payable, other working capital and depreciation) to manipulate bottom-line income in a given direction, consistent with their incentives. In other words, components of discretionary accruals are expected to be positively correlated. If they are not, this is an indication of high measurement error in the models estimating them. The alternative measure is tested in terms of its power (type II error) and specification (type I error) and compared to the traditional discretionary accruals measure. The power of the tests is measured in random samples with added accrual manipulation as well as a sample of firms targeted by the Securities and Exchange Commission for alleged fraud and a sample of firms that violated their debt covenants. The results indicate that the power of this alternative discretionary measure is higher than that of the traditional discretionary accruals measure. The specification (specificity) is tested in random samples chosen from the full sample as well as random samples chosen from extreme income and cash from operations observations and a sample in which discretionary accruals is a noisy measure of the estimated discretionary accruals. The results indicate that the specification of detecting earnings management behavior is improved by using the alternative discretionary accruals measure.