Pre managed earnings benchmarks and earnings management of Australian firms
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This article is published under the Open Access publishing model and distributed under the terms of the Creative Commons Attribution License https://creativecommons.org/licenses/by/3.0/au/. Please refer to the licence to obtain terms for any further reuse or distribution of this work.
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This study investigates benchmark beating behaviour and circumstances under which managers inflate earnings to beat earnings benchmarks. We show that two benchmarks, positive earnings and positive earnings change, are associated with earnings manipulation. Using a sample of Australian firms from 2000 to 2006, we find that when the underlying earnings are negative or below prior year’s earnings, firms are more likely to use discretionary accruals to inflate earnings to beat benchmarks.
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