Abstract
Arya, Glover, and Sunder (AGS) contribute to the earnings management literature along two dimenstion. First, they classify existing explanations for earnings manipulation, based on the assumption of the revelation principle that is violated. Second, they introduce a model where allowing a manager to manipulate earnings serves as a commitment device. They show that both the owners and the manager can benefit from earnings management (a Pareto improvement). My discussion first deals with the general phenomenon of earnings management and then with the specifics of the AGS model.
Full Citation
Review of Accounting Studies
vol.
3
,
(January 01, 1998):
35
-40
.