"Camouflaged Earnings Management"
Abstract
In recent years, there has been increased scrutiny of financial reporting and greater analysts and investors attention to indicators of potential earnings management, in particular, to cash and accruals relative to earnings and revenues. We assert that, in response, firms have increased their focus on cash management aimed at aligning these variables, which has resulted in camouflaged earnings management. Analytically, we develop indicators of camouflaged earnings management and use them empirically to test whether the alignment of cash and earnings has intensified following the legislation of the Sarbanes-Oxley Act. The empirical results are all in line with, and reinforce, our assertion. This suggests that any comprehensive investigation of earnings management should also consider the option of camouflaging.
Each author name for a Columbia Business School faculty member is linked to a faculty research page, which lists additional publications by that faculty member.
Each topic is linked to an index of publications on that topic.