What should an unmanaged earnings distribution look like?

Olivier Vidal (1)

1 GREG - CRC - Groupe de recherche en économie et en gestion - Centre de recherche en comptabilité

In asserting that the number of firms reporting small profits is abnormally high, thus suggesting that earnings management has taken place, accounting researchers assume that the distribution of reported earnings should be smooth for unmanaged earnings. This has never in fact been demonstrated. This article seeks to confirm this assumption through a laboratory experiment, and also sets out to identify the general distribution pattern to be expected for unmanaged earnings. Normal distribution does not appear to be a good fit. The study's results also highlight the existence of downward management of earnings by firms with higher-than-average profits.

Mots clés: Earnings management; earnings distribution; experiment; accounting threshold

Domaines: Gestion et management

Olivier Vidal. What should an unmanaged earnings distribution look like?. The Euro-Mediterranean Economics and Finance Review, 2010, 5 (2), pp.141-162. ⟨hal-00840715⟩