Rounding-up in reported EPS, behavioral thresholds, and earnings management

Rounding-up in reported EPS, behavioral thresholds, and earnings management

Reported earnings per share (EPS) are frequently rounded to the nearest cent. This paper provides evidence that firms manipulate earnings so that they can round-up and report one more cent of EPS. Specifically, we examine the digit immediately right of the decimal in the calculated EPS number expres...

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Main Authors: Das, Somnath, Zhang, Huai
Other Authors: Nanyang Business School
Format: Article
Language:English
Published: 2013
Subjects:
DRNTU::Business::Accounting::Valuation
Online Access:https://hdl.handle.net/10356/100280
http://hdl.handle.net/10220/18186
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Institution: Nanyang Technological University
Language: English
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spelling sg-ntu-dr.10356-1002802023-05-19T06:44:41Z Rounding-up in reported EPS, behavioral thresholds, and earnings management Das, Somnath Zhang, Huai Nanyang Business School DRNTU::Business::Accounting::Valuation Reported earnings per share (EPS) are frequently rounded to the nearest cent. This paper provides evidence that firms manipulate earnings so that they can round-up and report one more cent of EPS. Specifically, we examine the digit immediately right of the decimal in the calculated EPS number expressed in cents. Evidence is presented that firms are more likely to round-up when managers ex ante expect rounding-up to meet analysts’ forecasts, report positive profits, or sustain recent performance. Further investigation provides evidence that working capital accruals are used to round-up EPS. Accepted version 2013-12-10T01:45:03Z 2019-12-06T20:19:36Z 2013-12-10T01:45:03Z 2019-12-06T20:19:36Z 2003 2003 Journal Article Das, S., & Zhang, H. (2003). Rounding-up in reported EPS, behavioral thresholds, and earnings management. Journal of Accounting and Economics, 35(1), 31-50. 0165-4101 https://hdl.handle.net/10356/100280 http://hdl.handle.net/10220/18186 10.1016/S0165-4101(02)00096-4 en Journal of accounting and economics © 2003 Elsevier B.V. This is the author created version of a work that has been peer reviewed and accepted for publication by Journal of Accounting and Economics, Elsevier B.V. It incorporates referee’s comments but changes resulting from the publishing process, such as copyediting, structural formatting, may not be reflected in this document. The published version is available at: [DOI:http://dx.doi.org/10.1016/S0165-4101(02)00096-4 ]. 20 p. application/pdf
institution Nanyang Technological University
building NTU Library
continent Asia
country Singapore
Singapore
content_provider NTU Library
collection DR-NTU
language English
topic DRNTU::Business::Accounting::Valuation
spellingShingle DRNTU::Business::Accounting::Valuation
Das, Somnath
Zhang, Huai
Rounding-up in reported EPS, behavioral thresholds, and earnings management
description Reported earnings per share (EPS) are frequently rounded to the nearest cent. This paper provides evidence that firms manipulate earnings so that they can round-up and report one more cent of EPS. Specifically, we examine the digit immediately right of the decimal in the calculated EPS number expressed in cents. Evidence is presented that firms are more likely to round-up when managers ex ante expect rounding-up to meet analysts’ forecasts, report positive profits, or sustain recent performance. Further investigation provides evidence that working capital accruals are used to round-up EPS.
author2 Nanyang Business School
author_facet Nanyang Business School
Das, Somnath
Zhang, Huai
format Article
author Das, Somnath
Zhang, Huai
author_sort Das, Somnath
title Rounding-up in reported EPS, behavioral thresholds, and earnings management
title_short Rounding-up in reported EPS, behavioral thresholds, and earnings management
title_full Rounding-up in reported EPS, behavioral thresholds, and earnings management
title_fullStr Rounding-up in reported EPS, behavioral thresholds, and earnings management
title_full_unstemmed Rounding-up in reported EPS, behavioral thresholds, and earnings management
title_sort rounding-up in reported eps, behavioral thresholds, and earnings management
publishDate 2013
url https://hdl.handle.net/10356/100280
http://hdl.handle.net/10220/18186
_version_ 1770563532062982144

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