(琼斯模型1991)Earnings-Management-During-Import-Relief

AccountingResearchCenter,BoothSchoolofBusiness,UniversityofChicagoEarningsManagementDuringImportReliefInvestigationsAuthor(s):JenniferJ.JonesSource:JournalofAccountingResearch,Vol.29,No.2(Autumn,1991),pp.193-228Publishedby:BlackwellPublishingonbehalfofAccountingResearchCenter,BoothSchoolofBusiness,UniversityofChicagoStableURL::15/05/201118:48YouruseoftheJSTORarchiveindicatesyouracceptanceofJSTOR'sTermsandConditionsofUse,availableat.://=black..EachcopyofanypartofaJSTORtransmissionmustcontainthesamecopyrightnoticethatappearsonthescreenorprintedpageofsuchtransmission.JSTORisanot-for-profitservicethathelpsscholars,researchers,andstudentsdiscover,use,andbuilduponawiderangeofcontentinatrusteddigitalarchive.Weuseinformationtechnologyandtoolstoincreaseproductivityandfacilitatenewformsofscholarship.FormoreinformationaboutJSTOR,[e-mail]countingResearchCenter,BoothSchoolofBusiness,UniversityofChicagoarecollaboratingwithJSTORtodigitize,preserveandextendaccesstoJournalofAccountingResearch.*1.IntroductionThisstudytestswhetherfirmsthatwouldbenefitfromimportrelief(e.g.,tariffincreasesandquotareductions)attempttodecreaseearningsthroughearningsmanagementduringimportreliefinvestigationsbytheUnitedStatesInternationalTradeCommission(ITC).TheimportreliefdeterminationmadebytheITCisbasedonseveralfactorsthatarespecifiedinthefederaltradeacts,includingtheprofitabilityoftheindustry.Explicituseofaccountingnumbersinimportreliefregulationprovidesincentivesformanagerstomanageearningsinordertoincreasethelikelihoodofobtainingimportreliefand/orincreasetheamountofreliefgranted.Whilestudiesofearningsmanagementtypicallyexaminesituationsinwhichallcontractingpartieshaveincentivestoperfectlymonitor(adjust)accountingnumbersforsuchmanipulation,importreliefinves-tigationsprovideaspecificmotiveforearningsmanagementthatisnot*UniversityofChicago.Iamespeciallyindebtedtomydissertationcommittee,JohnBound,MichaelBradley(cochairman),MichaelMaher(cochairman),andThomasStoberfortheirassistanceandtootherswhohaveprovidedhelpfulcomments,notablyananonymousreferee,VictorBernard,DeanCrawford,LindaDeAngelo,BruceIkawa,WilliamKinney,RichardLeftwich,RobertLipe,PeterWilson,DavidWright,andworkshopparticipantsatCarnegie-MellonUniversity,NorthwesternUniversity,OhioStateUniver-sity,UniversityofArizona,UniversityofChicago,UniversityofIowa,UniversityofNorthCarolina,UniversityofRochester,WashingtonUniversity,andWhartonSchool.IamalsoindebtedtoRichardLaulorfromtheUnitedStatesInternationalTradeCommission(ITC)forhishelpinobtaininginformationabouttheimportreliefinvestigationprocessattheITC.ThispaperhasbeenfundedbytheInstituteofProfessionalAccountingattheUniversityofChicagoanddissertationfellowshipsfromtheArthurAndersen&Co.FoundationandtheUniversityofMichiganDykstraFund.193Copyright?,JournalofAccountingResearch1991194JOURNALOFACCOUNTINGRESEARCH,AUTUMN1991providedinotherearningsmanagementstudies.Importreliefisawealthtransferfromagroupofdiffuselosers(consumers)toagroupofconcen-tratedwinners(allothercontractingpartiesofdomesticproducersre-ceivingimportrelief).'Iarguethatconsumersdonotmonitorearningsmanagementaseffectivelyaslosersexaminedinotherstudiesbecausethelosstoeachconsumerissmaller,andtheirinterestsmorediverse,thanforthecontractingpartiesexaminedinthesestudies.2Regulatorshavelessincentivetoadjustformanagers'earningsmanipulationssincetheirultimatepayoffforsuchadjustmentislessdirectthaninothersituationspreviouslystudied(e.g.,unioncontractnegotiations).3Fur-thermore,interviewsofITCregulatorsindicatethattheITCdoesnotadjustfinancialdataforaccountingproceduresusedorforaccrualdecisionsmadebyfirms.Thisstudydocumentstheuseofaccountingnumbersinafederalgovernmentprogramasabasisforwealthtransfers(i.e.,importrelief).Anestimateofthediscretionarycomponentoftotalacrualsisusedasthemeasureofearningsmanagementratherthanthediscretionarycomponentofasingleaccrual(asusedinMcNicholsandWilson[1988]).Thediscretionarycomponentoftotalaccrualsismoreappropri-ateinthiscontextbecausetheITCisinterestedinearningsbeforetaxes,whichincludestheeffectsofallaccrualaccounts,and,assuch,managersarelikelytouseseveralaccrualstoreducereportedearnings.Firm-specificexpectationsmodelsaredevelopedtoestimatenormal(nondis-cretionary)accruals.Theexpectationsmodelscontrolfortheeffectsofeconomicconditionsonthelevelofaccruals.Iconductacross-sectionalanalysistotestwhetheresti