Window dressing in reported earnings: : a comparison of high-tech and low-tech companies

• Autores: Fengyi Lin, Lijuan Zhao, Liming Guan
• Localización: Emerging Markets Finance & Trade, ISSN-e 1558-0938, Nº. 50 (Supplement Jan/Feb), 2014, págs. 254-264
• Idioma: inglés
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• Resumen

  • We examine the rounding phenomenon (called window dressing) in financial reporting of U.S. high-tech and low-tech firms. By requiring that investments in research and development be expensed as incurred, the generally accepted accounting principles provide low-tech firms with a larger set of accounting choices with which to manipulate earnings than are provided to high-tech firms. Therefore, we find window dressing of earnings is more severe in low-tech firms than in high-tech firms. We also find that window dressing of revenues is more severe in high-tech firms than in low-tech firms. This result suggests that high-tech firms engage more in revenue management to compensate for the smaller set of accounting choices with which to manage earnings.