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Building on relational inequality theory, this paper incorporates social capital as a device to trace the flow of resources through relationships originating within and beyond organizations. I draw on a survey of over 1,700 lawyers to evaluate key dynamics of social capital that shape earnings: bridging and bonding, reciprocity exchanges and sponsorship, and boundary maintenance. The findings show social capital lends a lift to law graduates through bridges to professional careers and sponsorship following job entry. Racial minorities, however, suffer a shortfall of personal networks to facilitate job searches, and once having secured jobs, minorities experience social closure practices by clients and colleagues that disadvantage them in their professional work. A sizeable earnings gap remains between racial minority and white lawyers after controlling for human and social capitals, social closure practices, and organizational context. This earnings gap is particularly large among racial minorities with more years of experience and those working in large law firms. The findings demonstrate the importance of identifying the interrelations that connect social network and organizational context to impact social inequality.

The purpose of this paper is to investigate whether earnings management that surpasses a threshold is associated with market mispricing.

The paper examines the level of discretionary current accruals (DCA) as a proxy for earnings quality. Operationally the threshold of earnings management is defined as the mean DCA, and it is assumed that highly managed firms (both income‐decreasing and income‐increasing) produce low‐quality earnings information. It is postulated that such management may lead to mispricing errors by investors who make incorrect adjustments for lower earnings quality.

The evidence suggests that investors possess idiosyncratic perceptions toward earnings management. Investors of income‐decreasing firms tend to under‐adjust for analyst optimism, while investors of income‐increasing firms are inclined to over‐adjust for analyst optimism. In addition, investors of both types of highly managed firms appear to under‐adjust for earnings management. These investor characteristics result in a post‐earnings announcement upward drift of cumulative abnormal returns (CARs) for income‐decreasing firms and a downward drift for income‐increasing firms.

The findings strongly indicate that there is a significant mispricing at the earnings announcement date for the income‐decreasing (P1) and income‐increasing (P5) portfolios and the mispricing persists in the short run. Thus, it may be possible for investors to exploit the mispricing by holding a long position in P1 and a short position in P5.

Prior studies concentrate on extreme cases of earnings management that are subject to securities and exchange commission (SEC) enforcement. In contrast to these studies, this paper focuses on the market reaction to earnings management, which may or may not lead to SEC enforcement actions.

In Taiwan, an employee stock bonus (ESB) was accounted for as an earnings distribution rather than an expense – a remnant of the dominance of tax law over accounting standards. To enhance the usefulness of accounting information, the Securities and Futures Bureau (SFB) requires that public companies disclose imputed earnings per share (EPS) by deducting ESB from net income for the financial reporting, effective 30 January, 2003. Although the SFB‐imputed EPS considers ESB as firm expense, it ignores the resultant inflated number of shares outstanding. Therefore, it is expected that the disclosed ESB underestimates the dilutive effects of ESB and limits the intended purpose of the ESB disclosure. The purpose of this paper is to investigate how ESB dilutes EPS and how the SFB‐imputed EPS biases the price‐earnings relation.

Theoretical analyses and empirical tests.

First it was analytically illustrated that: the SFB‐imputed EPS, compared with the proposed EPS measure, underestimates the dilutive effects of ESB; the SFB‐imputed EPS downwardly biases the price‐earnings relation; and the proposed EPS preserves the relation between stock price and earnings. Controlling for firm growth and ESB issuance, empirical results were obtained that are generally consistent with the hypotheses. The SFB‐imputed EPS yields downward‐biased estimates of price earnings multiples. The downward bias is exacerbated as the dilution of ESB increases.

The proposed measurement of diluted EPS reflects the dilutive effect of ESB, upholds the price‐earnings relationship, and offers accounting standard‐setters a useful perspective for thinking about the dilutive effects of ESB.

Experts contend that knowledge of the personal labor market penalties (loss of employment and future wealth) incurred by past chief executive officers (CEOs) forced to restate their firms' earnings may induce current CEOs to refrain from fraudulent disclosures. Because of the increased incidence of earnings restatements and the importance of augmenting investor trust, this paper aims to examine empirically nonprofessional investors' impressions of managerial earnings restatement penalties as fraud deterrents.

The restatement penalties were explored in an experimental setting with nonprofessional investors as subjects. Using an experimental case as a basis, the study compared subjects' predictions of the probability that a CEO would fraudulently report a particular transaction under two general conditions: the absence of a specific fraud deterrent; and the presence of two potential deterrents, earnings restatement penalties and CEO financial statement certifications.

Statistical analyses revealed that investors viewed the earnings restatement penalties as fraud deterrents, providing a level of protection comparable to that offered by financial statement certifications, a mandated practice originally intended to deter fraud. These results suggest that investors' awareness of past restatement penalties could help to enhance the credibility of currently reported earnings.

The investigation of this topic makes two contributions to existing research. First, it provides empirical evidence concerning a potential fraud deterrent (earnings restatement penalties) previously unexamined in prior studies. Second, it represents a new area of inquiry in earnings restatement research, both in topic (the perceived deterrence qualities of restatement penalties) and in method (empirical research vs traditional archival studies).

The purpose of this paper is to investigate the link between ownership structure, earnings management (EM) preceding mergers and acquisitions (M&A) and the acquiring firm's subsequent long‐term market performance.

The authors measure the magnitude of discretionary current accruals using two methodologies, that of Teoh et al. and that of Kothari et al. The latter methodology is used to control for the presence of extreme performance prior to the event. The calendar‐time Fama‐French three‐factor model was used to evaluate long‐term stock performance and to minimize potential problems related to the cross‐sectional dependence of the returns.

It was found that firms using stock as a financing medium exhibit significant positive discretionary accruals during the year preceding the M&A and during the year of the acquisition. It was also documented that voting right concentration and control‐enhancing mechanisms are not associated with any significant level of earnings management. Finally, a negative association was found between EM and abnormal stock returns over a three‐year period following the acquisition.

These results suggest that the concentrated ownership alignment effect dominates the entrenchment motives and acts as a deterrent mechanism to prevent controlling shareholders from managing earnings in stock‐financed M&A.

The authors’ results highlight the importance of maintaining good legal and extra‐legal protection of minority shareholders. Regulators can play an important role in preventing dominant shareholders from engaging in opportunistic EM in stock‐financed M&A.

The paper extends prior literature by taking a closer look at dominant shareholders’ motivations to manage earnings in stock‐financed M&A. Large shareholders have strong incentives to manage earnings upward prior to stock‐financed transactions to limit the dilution of their controlling position.

Persons with disabilities (PWD) are among the largest and most diverse minority groups and among the most disadvantaged in terms of employment. Entrepreneurial pursuit is often advocated as a path toward employment, inclusion, and equality, yet few studies have investigated earning variation among PWD.

The authors draw on social cognitive career theory (SCCT), and the disability employment and entrepreneurship literature to develop hypotheses about who among PWD are likely to earn more (less) from entrepreneurial pursuits. The authors then conduct analyses on the nationally representative sample of the Canadian Survey on Disability (CSD) by including all PWD engaged in entrepreneurial pursuit, and matching each to an organizationally employed counterpart of the same gender and race and of similar age and disability severity (n ≈ 810).

Entrepreneurial pursuit has a stronger negative association with the earnings of PWD who experience earlier disability onset ages, those who report more unmet accommodation needs, and those who are female.

First, this study applies SCCT to help bridge the literature on organizational employment barriers for PWD and entrepreneurs with disabilities. Second, we call into question the logic of neoliberalism about entrepreneurship by showing that barriers to organizational employment impact entrepreneurial pursuit decisions and thereby earnings. Third, we extend the understanding of entrepreneurial earnings among PWD by examining understudied disability attributes and demographic attributes. Lastly, this study is among the first to use a matched sample to empirically test the impact of entrepreneurial pursuit on the earnings of PWD.

This paper aims to examine the effect of managerial ability (MA) on real earnings management and the effect of real earnings management by higher ability managers on future profitability, at a different level of the crime rate.

The research sample includes 864 manufacturing firms-years listed on the Indonesian Stock Exchange. MA uses an efficiency score by data envelopment analysis. Real earnings management is measured by abnormal activities. The crime rate is measured by logarithm natural of the number of crimes per 100.000 citizens in the region where the firm is headquartered. Data analysis uses fixed-effect regression.

MA increases real earnings management in the region where the firm is headquartered with a higher crime rate while MA will reduce real earnings management in the region where the firm is headquartered with a lower crime rate. Also, real earnings management by higher-ability managers gives a signal of better future profitability in the region where the firm is headquartered with a lower crime rate.

This research contributes to filling the previous gap of managerial characteristics ability-related on real earnings management by providing regional crime rate as a determinant factor of managers’ ethical behavior. This research is the first one to considers the regional crime rate treatment to the relationship between MA and real earnings management especially in Indonesia. This research also provides new evidence of efficient real earnings management for a lower crime rate group of samples to give a signal of better future profitability.

The purpose of this paper is to explore the link between earnings quality, Audit Committees and the Board of companies located in Jordan through the lens of enhancing corporate governance.

The real earnings management (REM) and accruals earnings management models were notably used within the panel data robust regression analysis approach; these were used against certain Audit Committee characteristics (i.e. meeting frequency, amount of Board and Committee participants [both internal and external], size) and Board of Directors.

The former characteristics were found to have a positive relationship with REM, while the latter yielded mixed results: while there was no significant identifiable relationship between Board outsiders and REM, there was a positive relationship identified between Board meetings, Board insiders and Board size and REM. In regard to this study’s limitations, the qualitative data gathered for the Board of Directors through the lens of corporate governance enhancement should have been documented with more detail; furthermore, the study was limited to the study of just one nation.

The data is limited to only a single country. More explanation for Board of Directors need qualitative understandings into corporate governance improvement. The control variables are essentially partial in a developing market context.

The different corporate governance code and guidelines improvements have varied influence on earnings quality. As predictable, boards of directors most effect on earnings quality. Improvements have included most modification to audit committees but through them slight measured effect on earnings quality.

Jordan’s corporate governance improvements expected organised corporate governance practices generally in place amongst its boards, and though invoking considerable modification to audit committees, eventually included slight modification to earnings quality. However, both improved earnings quality.

This particular research appears to be the first to consider both Audit Committee and Board of Directors characteristics in one model; indeed, in this vein, this research is also the first to explore the corporate governance enhancements that initially stemmed from there being zero code or guideline regarding its use, despite it becoming required recently. Hence, the authors can say this study has high originality.

The purpose of this paper is to investigate the spillover effects of a bright-line disclosure regulation that required Chinese listed firms to provide earnings forecasts if they anticipated specified, large earnings changes.

The paper examines the discontinuity of the earnings change distribution of firms listed on the Shenzhen Stock Market between 2010 and 2014. The paper finds that firms no longer subject to the bright-line test still exhibited discontinuity in earnings change distribution. The discontinuity lasted for at least three years with magnitude comparable to that of the firms still subject to the bright-line test. In addition, newly listed firms that had never experienced the bright-line test showed similar tendency to avoid the same threshold. There is some evidence that these firms’ avoidance of the −50 per cent changes was partly because of market pressure.

Research on bright-line tests has to date focused on their immediate and direct effects on firms currently subject to such tests. This study finds that a bright-line disclosure regulation’s influence is not limited to the firms directly governed by the regulation. It could lead to widespread and long lasting distortions in financial reporting behaviors of firms not currently subject to such tests.

The paper has implications for regulators who study the economic consequences of bright-line regulations in general and analysts of the Chinese capital market in particular.

This is the first empirical report that bright-line disclosure regulations affected the financial reporting behavior of firms that were not directly subject to the bright-line tests.

The study aims to examine whether board gender diversity and corporate social responsibility (CSR) affect real earnings management (REM) practices of public companies in Nigeria.

The study analyzes data of public companies for the period of 2011 through 2020. Data on board gender diversity, CSR and REM were collected from audited financial statements.

The empirical findings show that companies with greater diverse board are effective in restraining REM, thus supporting the theoretical framework of the study. Also, the result provides strong evidence of association between CSR performance and REM for policy management decision.

The study is constrained by not considering all public companies in the country. Furthermore, it considered only gender among numerous important board attributes and environmental, social and governance (ESG) among numerous CSR attributes. Hence, future studies should consider other important attributes on REM and important attributes of board diversity and CSR on real earnings management.

To the best of the authors’ knowledge, this study is the first to investigate the relationship between heterogeneous board gender diversity, CSR via ESG and REM in emerging markets such as Nigeria. Therefore, it provides appropriate treatment of CSR with science and technology via EGS viewpoint of organizational operations and behavior of managing earnings. Therefore, developing better policy management for sustainable development