Table 9. The association between...

Table 9.

The association between consumers’ inflation expectations and earnings management (accrual-based and real) across business cycle conditions

	Expansion			Recession
Variables	$P O S D A$	$N E G D A$		$P O S D A$	$N E G D A$
Panel A
$C O N S A C C I N F L E X P$	0.000646* (1.733)	0.000567 (1.335)		0.00349*** (6.148)	0.00277*** (4.021)
LEV	0.00547** (2.557)	−0.00990*** (−4.800)		−0.00203 (−0.583)	−0.0116*** (−3.524)
SALESGR	0.0177*** (14.16)	0.00430*** (3.469)		0.0170*** (7.026)	−0.00182 (−0.774)
SIZE	−0.00187*** (−10.44)	−0.00133*** (−7.992)		−0.00158*** (−6.855)	−0.00116*** (−5.014)
LOSS	0.000472 (0.875)	0.00413*** (7.462)		0.00166** (2.200)	0.00472*** (5.411)
Constant	0.0473*** (12.28)	0.0519*** (13.98)		0.0244*** (5.484)	0.0147*** (3.526)
Observations	22,914	22,693		6,592	6,372
Number of firms	1,936	1,930		1,598	1,606
Degrees of freedom	22,818	22,597		6,533	6,313
Country FE	Yes	Yes		Yes	Yes
Quarter FE	Yes	Yes		Yes	Yes
Industry FE	Yes	Yes		Yes	Yes
R² within	0.1049	0.0811		0.1052	0.078
R² between	0.2185	0.2127		0.2000	0.1831
Panel B
Variables	$A B N C F O$	$A B N P R O D$	$A B N C F O$		$A B N P R O D$
$C O N S R E A L I N F L E X P$	0.000919 (1.021)	0.000454 (0.742)	0.00275** (2.300)		0.00254*** (3.433)
LEV	0.0261*** (3.567)	−0.00929** (−2.447)	0.00726 (0.917)		−0.00689 (−1.497)
ROA	−0.465*** (−14.09)	−0.154*** (−8.466)	−0.383*** (−9.699)		−0.0980*** (−4.643)
SALESGR	0.00623*** (4.049)	0.00104 (0.804)	0.00713*** (3.149)		0.00131 (0.599)
SIZE	−0.00793*** (−8.513)	0.00264*** (3.616)	−0.00481*** (−6.057)		0.00244*** (4.624)
LOSS	0.00179 (1.315)	0.00110 (1.254)	0.000470 (0.283)		0.00199* (1.689)
Constant	0.0715*** (5.536)	−0.00947 (−0.935)	0.0328** (2.290)		−0.0155 (−1.501)
Observations	43,489	40,308	12,502		11,607
Number of firms	1,980	1,822	1,742		1,598
Degrees of freedom	43,392	40,211	12,442		11,547
Country FE	Yes	Yes	Yes		Yes
Quarter FE	Yes	Yes	Yes		Yes
Industry FE	Yes	Yes	Yes		Yes
R² within	0.0501	0.0118	0.0312		0.00815
R² between	0.3955	0.0679	0.2560		0.0642

	Expansion			Recession
Variables	$P O S D A$	$N E G D A$		$P O S D A$	$N E G D A$
Panel A
$C O N S A C C I N F L E X P$	0.000646* (1.733)	0.000567 (1.335)		0.00349*** (6.148)	0.00277*** (4.021)
LEV	0.00547** (2.557)	−0.00990*** (−4.800)		−0.00203 (−0.583)	−0.0116*** (−3.524)
SALESGR	0.0177*** (14.16)	0.00430*** (3.469)		0.0170*** (7.026)	−0.00182 (−0.774)
SIZE	−0.00187*** (−10.44)	−0.00133*** (−7.992)		−0.00158*** (−6.855)	−0.00116*** (−5.014)
LOSS	0.000472 (0.875)	0.00413*** (7.462)		0.00166** (2.200)	0.00472*** (5.411)
Constant	0.0473*** (12.28)	0.0519*** (13.98)		0.0244*** (5.484)	0.0147*** (3.526)
Observations	22,914	22,693		6,592	6,372
Number of firms	1,936	1,930		1,598	1,606
Degrees of freedom	22,818	22,597		6,533	6,313
Country FE	Yes	Yes		Yes	Yes
Quarter FE	Yes	Yes		Yes	Yes
Industry FE	Yes	Yes		Yes	Yes
R² within	0.1049	0.0811		0.1052	0.078
R² between	0.2185	0.2127		0.2000	0.1831
Panel B
Variables	$A B N C F O$	$A B N P R O D$	$A B N C F O$		$A B N P R O D$
$C O N S R E A L I N F L E X P$	0.000919 (1.021)	0.000454 (0.742)	0.00275** (2.300)		0.00254*** (3.433)
LEV	0.0261*** (3.567)	−0.00929** (−2.447)	0.00726 (0.917)		−0.00689 (−1.497)
ROA	−0.465*** (−14.09)	−0.154*** (−8.466)	−0.383*** (−9.699)		−0.0980*** (−4.643)
SALESGR	0.00623*** (4.049)	0.00104 (0.804)	0.00713*** (3.149)		0.00131 (0.599)
SIZE	−0.00793*** (−8.513)	0.00264*** (3.616)	−0.00481*** (−6.057)		0.00244*** (4.624)
LOSS	0.00179 (1.315)	0.00110 (1.254)	0.000470 (0.283)		0.00199* (1.689)
Constant	0.0715*** (5.536)	−0.00947 (−0.935)	0.0328** (2.290)		−0.0155 (−1.501)
Observations	43,489	40,308	12,502		11,607
Number of firms	1,980	1,822	1,742		1,598
Degrees of freedom	43,392	40,211	12,442		11,547
Country FE	Yes	Yes	Yes		Yes
Quarter FE	Yes	Yes	Yes		Yes
Industry FE	Yes	Yes	Yes		Yes
R² within	0.0501	0.0118	0.0312		0.00815
R² between	0.3955	0.0679	0.2560		0.0642

Note(s):

This table presents the regression results on the association between consumers’ inflation expectations and earnings management (accrual-based and real) during expansions and recessions as established by the CEPR. Z-statistics reported in parentheses are based on standard errors clustered by firm. The extreme values of all continuous variables are winsorized at the 1st and 99th percentiles. Definition and measurement of variables are presented in Table 1. *, ** and *** denote significance at the 10, 5 and 1% levels, respectively. All predictor variables were assessed for multicollinearity. Variance inflation factor (VIF) values are below 5, indicating no significant multicollinearity

Source(s): Authors’ own work

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