Appendix: Literature Review Appendix A: Earnings Management Title Author Object of the Sample Research Methodology Outcome (S) study 1. A review of Paul M. This paper n/a They make reviews on 1. The current earnings the earnings Healy mainly reviews the previous literatures. management literatures management and the previous provide only moderate literature and James academic insights for standard its implications M. studies with setters; for standard Wahlen regard to 2. The underlying setting (1999) earnings reasons for the management appearance of earnings and point out management are the some stock market perception, implications management for accounting compensation, contracts standard and avoidance of setters and regulatory intervention. regulators. 2. Earnings David This paper A sample of They use the 1. They find unusually management to provides 64466 distributions low frequencies of small avoid earnings evidence on observations of earnings changes and decreases in earnings and decreases and and Ilia the in the context earnings to test the small losses as well as losses Dichev phenomenon of American hypotheses. unusually high (1997) that firms firms. frequencies of small manage increases in earnings and reported small positive income; earnings in 2. Two components of order to avoid earnings, cash flow from earnings operations and changes decreases and in working capital are losses. used to achieve increases in earnings.
Appendix: Literature Review Appendix A: Earnings Management Title Author (S) Object of the study Sample Research Methodology Outcome 1. A review of the earnings management literature and its implications for standard setting Paul M. Healy and James M. Wahlen (1999) This paper mainly reviews the previous academic studies with regard to earnings management and point out some implications for accounting standard setters and regulators. n/a They make reviews on the previous literatures. 1. The current earnings management literatures provide only moderate insights for standard setters; 2. The underlying reasons for the appearance of earnings management are the stock market perception, management compensation, contracts and avoidance of regulatory intervention. 2. Earnings management to avoid earnings decreases and losses David and Ilia Dichev (1997) This paper provides evidence on the phenomenon that firms manage reported earnings in order to avoid earnings decreases and losses. A sample of 64466 observations in the context of American firms. They use the distributions of earnings changes and earnings to test the hypotheses. 1. They find unusually low frequencies of small decreases in earnings and small losses as well as unusually high frequencies of small increases in earnings and small positive income; 2. Two components of earnings, cash flow from operations and changes in working capital are used to achieve increases in earnings.