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The purpose of this study is to examine the impact of public accounting firms' mix of service revenue on their average productivity measured by total revenue per partner.

Using data from Public Accounting Report on top public accounting firms by revenue, an OLS regression model is applied by regressing revenue per partner on the percentage of revenue generated from auditing and attest, tax, management consulting, and other services independently.

Results show that the proportion of auditing and attest service revenue is negatively associated with public accounting firms' productivity. However, the proportion of other services revenue, other than tax and management consulting services, is positively associated with productivity. Additional investigation shows that if public accounting firms provide other services in their mix of services, then tax and management consulting services do not contribute to these public accounting firms' productivity.

Results of this study cannot be generalized beyond the top 100 public accounting firms, and the measurement of revenue per partner ignores the exact number of partners within different service areas.

Although auditing and attest services are considered core services of public accounting firms, they do not increase the productivity of the firm.

This study helps in assessing whether average productivity of public accounting firms is affected by the proportion of a specific type of service in the post‐SOX era.

The authors aim at investigating different forms of classification shifting (CS). CS is a novel form of earnings management under which managers misclassify income statement line items and cash flow statement line items with an intent to report favorable operating performance of firms. In particular, the authors check the existence of revenue misclassification, expense misclassification and cash flows misclassification among Indian firms by taking the uniform sample of firms over a single period.

Operating revenue model (Malikov et al., 2018), core earnings expectation model (McVay, 2006) and operating cash flows model (Roychowdhury, 2006) are employed for measuring revenue misclassification, expense misclassification and cash flows misclassification, respectively. The panel data regression models are used to analyze the data for this study.

Based on the sample of 12,870 Bombay Stock Exchange (BSE) listed firm-years observations between 2010 and 2018, we find that, on average, Indian firms are engaged in revenue misclassification rather than expense misclassification to report inflated core earnings. Firms are found to be engaged in cash flows misclassification too. Besides, we find that magnitude of shifting is greater among larger firms. Results also establish that adoption of Ind AS increases the scope of shifting practices. These results are based on several robustness checks.

The results suggest that investors conduct a comprehensive review of the items of financial statements before using them in their portfolio valuation. It suggests auditors check the basis of revenue classification and standard-setting authorities, like ICAI in India, to make more mandatory disclosure requirements for classification of revenues and cash flows. It suggests lenders not to make lending decisions by looking at the operating performance metrics, as CS is the most preferred tool to positively influence the perception of lenders toward operating performance.

It is the first study that investigates different forms of classification shifting jointly for a sample of firms. Most of the earlier studies have examined one kind of classification shifting at a time. This study adds to the existing literature on earnings management by documenting that some firm-specific factors pressurize firms to prefer one form of shifting over another to report inflated core earnings.

The paper aims to examine the value relevance of alternative accounting performance measures in Australia. It also documents the relative and incremental value relevance of revenue vis‐à‐vis earnings and the longitudinal changes in such value relevance. Finally, the impact of certain firm characteristics including firm life cycle on the value relevance of revenue and earnings information is investigated.

The paper utilises data on Australian listed companies from 1992 to 2005 on the level of and changes in seven alternative accounting performance measures. Standard ordinary least square regression is conducted.

Results reveal that: the coefficient estimates on all the performance measures are much higher for large firms compared to their small firm counterpart; the explanatory power of incremental revenue in explaining stock returns has declined significantly over the sample period; and life cycle analysis shows that the combined coefficients for both revenue and earnings are significant in the growth and maturity stages of the firm life cycle.

When making equity valuation decisions investors consider firms' fundamentals as reflected in financial statements. However, which line item is more important for equity valuation is an important consideration. From a regulatory perspective, this stream of research is quite relevant because standard setters will have evidence from an investor viewpoint about whether certain line items, subtotals, and totals should be defined in standards and required to be displayed in financial statements.

The paper adds to the existing capital market research in Australia by documenting differential persistence of alternative performance measures.

Typical accounting firms offer three types of accounting services to their clients: accounting and auditing (AA), tax (TAX) and management advisory services (MAS). Each accounting service has a different revenue persistence. Moreover, revenue persistence is affected by exogenous events such as new regulations (e.g. Sarbanes-Oxley Act [SOX] in 2002) and market conditions (e.g. the financial crisis of 2008). This paper aims to examine the revenue persistence of accounting services and how it is affected by SOX and the financial crisis.

Using 742 firm-year observations from 100 of the largest US accounting firms from 1999 to 2015, this paper examines whether revenue from AA, TAX and MAS has different degrees of persistence and how SOX and the financial crisis in 2008 change the revenue persistence of each accounting service.

This paper finds that MAS generates more persistent revenue than AA and TAX. SOX enhances the revenue persistence of MAS. The financial crisis makes revenue from AA less persistent than during the pre-financial crisis period.

This paper contributes to the understanding of the revenue persistence of accounting services and the impact of exogenous events such as SOX and the financial crisis of 2008.

This study aims to investigate the impact of mandatory corporate social responsibility (CSR) spending legislation on the earnings management strategies of firms.

The authors use panel data regression models to analyze the data for this study. This study covers the post-legislation period, which spans over five years from the financial year ending March 2015 to the financial year ending March 2019.

The results show that firms manipulate accounting measures to avoid breaching the cut-off criteria for mandatory CSR. In particular, the results show that firms operating around the operating revenue threshold misclassify operating revenue as non-operating revenue. In contrast, firms operating around the net worth and net profit thresholds do downward real and accrual earnings management. These results are consistent with several robustness measures.

To the best of the authors’ knowledge, this is the first study that examines the impact of mandatory CSR spending on earnings management.

This study aims to investigate earnings management practice of classification shifting of revenues in Chinese-listed firms.

The study employs a dataset of 2,920 A-listed firms from Chinese stock exchanges of Shanghai and Shenzhen for the period of 2003–2019. We apply both univariate and panel regression analysis by using fixed effect estimation with robust standard errors.

Our findings reveal that firms misclassify revenues by taking advantage of the flexibility provided by applicable financial reporting standards. The empirical evidence obtained through regression analysis suggest that managers reclassify non-operating revenues as operating revenue to alter the economic reality while seeking the advantage of financial reports users’ vulnerability for valuing the upper half of income statement items more as compared to lower part. The results further indicate that international financial reporting standards adoption inhibits the earnings management practices using classification shifting of revenues. It is also concluded that firms, which are suffering losses or having low growth, are more persistently involved in misclassification of revenues.

The study is unique from the point of view that it investigates earnings management from the prospective of revenue’s classification in an emerging market characterized by various market imperfections such as lower investor protection and higher information asymmetry.

When original equipment manufacturers (OEMs) examine whether to implement a reverse supply chain (RSC) for their products, oftentimes the motive is cost savings or regulatory compliance. However, a frequently overlooked but equally important benefit is the possibility for creating new revenue. The purpose of this paper is to examine which revenue streams the RSC enables for OEMs to utilize and how these streams are utilized in industrial practice.

First, the paper identifies the RSC-enabled revenue streams that are available to OEMs using a literature-based conceptual modeling approach. Second, using a set of eight cases the paper explores these streams’ utilization pattern and develops a set of propositions that explain the pattern.

Results show a set of 12 distinct RSC-enabled revenue streams within three categories: new revenue through sales of used items, new revenue through sales of recovered items, and new revenue through added sales of virgin products. Six of these 12 streams are utilized in industrial practice. Among the propositions that explain the utilization pattern are the degree of component customization, product life-cycle longevity, and the value gap between used and recovered products.

While extant literature concerning the relation between the RSC and the firm’s revenue is scarce, this paper contributes to the understanding of RSCs’ revenue generation potential and thus to the stream of literature that views the RSC as a value creator rather than a costly nuisance. Furthermore, the paper provides managers with a broad view of how their firm’s RSC can increase revenue from existing markets as well as create revenue from new markets.

The study aims to investigates which form of classification shifting is preferred by firms to avoid the violation of debt covenants and whether the higher-audit quality constraints the shifting practices of firms incentivized to avoid covenant violations or not.

A sample of 1,644 Bombay Stock Exchange (BSE)-listed firms during the period 2009–2021 has been used in this study and tested through panel data regression models. Two forms of classification shifting, namely expense shifting and revenue shifting have been taken into account. The findings are validated through the propensity-score matching technique.

The findings deduced from the empirical evidence demonstrate that firms prefer revenue shifting over expense shifting to avoid covenant violations, consistent with the notion of the ease-need-advantage-based shifting framework, where firms are found to prefer a shifting tool with greater relative advantage. Further, the author finds that superior audit quality has a constraining effect on expense shifting, but not on revenue shifting, indicating the partial effectiveness of high-quality auditors in curbing the corporate misfeasance of classification shifting. These results are robust to the problem of endogeneity and self-selection bias.

The paper provides new evidence on debt market incentives behind classification shifting, where firms are found to substitute classification shifting forms to avoid covenant violations. Further, the study is among pioneering attempts to investigate the impact of audit quality on revenue shifting and document the non-constraining effect.

Prior studies document that managers engaged in shifting of non-operating revenue to operating revenue (revenue shifting) and shifting of operating expenses to non-operating expenses (expense shifting (ES)) within income statement to report inflated operating profits of firms. This study aims to identify the factors affecting revenue shifting and ES.

The operating revenue model (Malikov et al., 2018) and the core earnings expectation model (McVay, 2006) are used for measuring revenue shifting and ES, respectively. The panel data regression models are used to analyze the data for this study.

The study results show that large and old firms are engaged in revenue shifting, whereas small and young firms prefer ES over revenue shifting for reporting inflated operating profits. These results imply that firms choose the shifting strategy based on relative advantage and ease in execution. The results are robust after controlling for accruals earnings management, real earnings management and endogeneity bias.

It suggests investors minutely investigate the operating performance metrics of initial public offering firms that are relatively small and young while buying their shares. Besides, findings suggest accounting standard setters make more mandatory disclosure requirements for recording expense and revenue items in the income statement to curb this corporate misfeasance of classification shifting.

This is among the earlier attempts to identify firm-specific factors that incentivize firms to prefer one form of shifting over another. Second, the study jointly examines both forms of shifting by taking a uniform sample of firms over the same period. Most of the prior studies have examined one form at a time.

This study aims to investigate the impact of business strategy on the classification shifting practices of Indian firms.

The study considered cost leadership and differentiation strategy. Two forms of classification shifting, namely, expense misclassification and revenue misclassification have been examined in this study. Panel data regression models are used to analyze the data for this study.

The results show that managers of cost leadership strategy firms are more likely to be engaged in expense misclassification, whereas firms following differentiation strategy are likely to be engaged in revenue misclassification. Subsequent tests of this study suggest that firms following a hybrid strategy (mix of cost leadership and differentiation) prefer revenue misclassification over expense misclassification for reporting inflated operating performance. These results imply that firms prefer the shifting tool based on the ease and need of each shifting strategy. These results are consistent with several robustness measures.

The results suggest that investors should understand business strategy before developing insights about the accounting quality of firms. Investors should conduct a comprehensive review of income statement items before using items for portfolio evaluation.

To the best of the authors’ knowledge, this is the first study to examine the association between business strategy and classification shifting.