Market reactions to managed MBE
| (1) | (2) | (3) | (4) | (5) | |||
|---|---|---|---|---|---|---|---|
| BHAR[−1, 1] | BHAR[−2, 2] | BHAR[−3, 3] | BHAR[−5, 5] | BHAR[−10, 10] | |||
| Panel A: BHARs for MBE_EM firms | |||||||
| (1) | MBE_EM = 1 | Mean | 0.002** | 0.004*** | 0.006*** | 0.007*** | 0.010*** |
| p-value | (0.014) | (0.000) | (0.000) | (0.000) | (0.000) | ||
| n | 2,387 | 2,387 | 2,387 | 2,387 | 2,387 | ||
| (2) | MBE_EM = 0 | Mean | 0.003*** | 0.006*** | 0.008*** | 0.011*** | 0.014*** |
| p-value | (0.003) | (0.000) | (0.000) | (0.000) | (0.000) | ||
| n | 1,543 | 1,543 | 1,543 | 1,543 | 1,543 | ||
| Dif: (1) – (2) | Dif | −0.001 | −0.001 | −0.002 | −0.004 | −0.003 | |
| p-value | (0.383) | (0.452) | (0.330) | (0.119) | (0.278) | ||
| (1) | (2) | (3) | (4) | (5) | |||
|---|---|---|---|---|---|---|---|
| (1) | Mean | 0.002** | 0.004*** | 0.006*** | 0.007*** | 0.010*** | |
| (0.014) | (0.000) | (0.000) | (0.000) | (0.000) | |||
| 2,387 | 2,387 | 2,387 | 2,387 | 2,387 | |||
| (2) | Mean | 0.003*** | 0.006*** | 0.008*** | 0.011*** | 0.014*** | |
| (0.003) | (0.000) | (0.000) | (0.000) | (0.000) | |||
| 1,543 | 1,543 | 1,543 | 1,543 | 1,543 | |||
| Dif: (1) – (2) | −0.001 | −0.001 | −0.002 | −0.004 | −0.003 | ||
| (0.383) | (0.452) | (0.330) | (0.119) | (0.278) | |||
| Pred. sign | (1) | (2) | (3) | (4) | (5) | |
|---|---|---|---|---|---|---|
| Dep. var | BHAR[−1, 1] | BHAR[−2, 2] | BHAR[−3, 3] | BHAR[−5, 5] | BHAR[−10, 10] | |
| Panel B: Regression results of market reactions to earnings announcements by MBE_EM firms | ||||||
| MBE_EM | − | 0.014 (0.139) | 0.006 (0.628) | −0.000 (0.990) | 0.010 (0.516) | 0.008 (0.684) |
| Surprise_rank | + | 0.023** (0.015) | 0.021* (0.060) | 0.022* (0.091) | 0.032** (0.028) | 0.046** (0.019) |
| MBE_EM × Surprise_rank | − | −0.018 (0.120) | −0.007 (0.633) | 0.000 (0.999) | −0.014 (0.437) | −0.012 (0.610) |
| Analyst | + | 0.000*** (0.008) | 0.000*** (0.003) | 0.000*** (0.001) | 0.000* (0.064) | 0.000 (0.715) |
| GVT | − | −0.002 (0.301) | −0.002 (0.255) | −0.002 (0.480) | 0.002 (0.509) | −0.000 (0.903) |
| ROA | + | 0.027 (0.178) | 0.042* (0.091) | 0.032 (0.249) | 0.044 (0.172) | 0.061 (0.229) |
| ETP | + | 0.001 (0.969) | 0.014 (0.575) | 0.025 (0.390) | 0.020 (0.521) | 0.032 (0.489) |
| Size | − | −0.000 (0.912) | −0.000 (0.740) | −0.001 (0.187) | −0.002 (0.171) | −0.005*** (0.004) |
| MTB | + | 0.001*** (0.002) | 0.001** (0.047) | 0.001 (0.110) | 0.001 (0.135) | 0.001 (0.135) |
| Leverage | + | 0.006 (0.221) | 0.006 (0.320) | 0.004 (0.553) | 0.002 (0.816) | 0.023* (0.063) |
| CFO | + | 0.000 (0.975) | −0.000 (0.980) | 0.002 (0.709) | 0.004 (0.555) | 0.006 (0.393) |
| Prior stock return | ? | −0.004 (0.335) | −0.001 (0.873) | 0.001 (0.905) | 0.009 (0.156) | 0.011 (0.212) |
| Constant | −0.018 (0.289) | −0.008 (0.693) | 0.019 (0.412) | 0.023 (0.394) | 0.080** (0.033) | |
| Year fixed effects | Yes | Yes | Yes | Yes | Yes | |
| Industry fixed effects | Yes | Yes | Yes | Yes | Yes | |
| Observations | 3,930 | 3,902 | 3,873 | 3,809 | 3,622 | |
| R2 | 0.030 | 0.029 | 0.028 | 0.031 | 0.030 | |
| Pred. sign | (1) | (2) | (3) | (4) | (5) | |
|---|---|---|---|---|---|---|
| Dep. var | ||||||
| 0.014 (0.139) | 0.006 (0.628) | −0.000 (0.990) | 0.010 (0.516) | 0.008 (0.684) | ||
| + | 0.023** (0.015) | 0.021* (0.060) | 0.022* (0.091) | 0.032** (0.028) | 0.046** (0.019) | |
| −0.018 (0.120) | −0.007 (0.633) | 0.000 (0.999) | −0.014 (0.437) | −0.012 (0.610) | ||
| + | 0.000*** (0.008) | 0.000*** (0.003) | 0.000*** (0.001) | 0.000* (0.064) | 0.000 (0.715) | |
| −0.002 (0.301) | −0.002 (0.255) | −0.002 (0.480) | 0.002 (0.509) | −0.000 (0.903) | ||
| + | 0.027 (0.178) | 0.042* (0.091) | 0.032 (0.249) | 0.044 (0.172) | 0.061 (0.229) | |
| + | 0.001 (0.969) | 0.014 (0.575) | 0.025 (0.390) | 0.020 (0.521) | 0.032 (0.489) | |
| −0.000 (0.912) | −0.000 (0.740) | −0.001 (0.187) | −0.002 (0.171) | −0.005*** (0.004) | ||
| + | 0.001*** (0.002) | 0.001** (0.047) | 0.001 (0.110) | 0.001 (0.135) | 0.001 (0.135) | |
| + | 0.006 (0.221) | 0.006 (0.320) | 0.004 (0.553) | 0.002 (0.816) | 0.023* (0.063) | |
| + | 0.000 (0.975) | −0.000 (0.980) | 0.002 (0.709) | 0.004 (0.555) | 0.006 (0.393) | |
| ? | −0.004 (0.335) | −0.001 (0.873) | 0.001 (0.905) | 0.009 (0.156) | 0.011 (0.212) | |
| Constant | −0.018 (0.289) | −0.008 (0.693) | 0.019 (0.412) | 0.023 (0.394) | 0.080** (0.033) | |
| Year fixed effects | Yes | Yes | Yes | Yes | Yes | |
| Industry fixed effects | Yes | Yes | Yes | Yes | Yes | |
| Observations | 3,930 | 3,902 | 3,873 | 3,809 | 3,622 | |
| 0.030 | 0.029 | 0.028 | 0.031 | 0.030 | ||
Note(s): This table presents results of market reactions to earnings announcements by MBE firms that are identified as having managed earnings to achieve MBE (MBE_EM firms). Panel A presents mean BHARs for MBE_EM firms (MBE_EM = 1) and MBE firms not identified as MBE_EM firms (MBE_EM = 0). Panel B presents the regression results. The sample used in Panel B is MBE firms (MBE = 1), and MBE firms that are not identified as MBE_EM firms serve as the control group omitted from the regression for comparison with MBE_EM. MBE_EM is a dummy variable equal to 1 if an MBE firm is identified as having engaged in income increasing earnings management, and 0 otherwise. A firm is classified as an MBE_EM firm in a year if it is either in the highest quintile of AAcruals, AProduction, ARPS or ARPP, or in the lowest quintile of AExpenditures and ACFO in the year. Surprise_rank is an ordinal variable obtained by ranking Surprise into deciles, subtracting 1 and then dividing by 9. Other variables are defined in Appendix 1. p-values for two-tailed tests are given in parentheses and are based on robust standard errors clustered by firm and year. *, ** and *** indicate statistical significance at the 10, 5 and 1% levels, respectively
Sharing content requires targeting cookies to be enabled. Please update your cookie preferences to use this feature.