Identifier

etd-06212012-212936

Degree

Doctor of Philosophy (PhD)

Department

Accounting

Document Type

Dissertation

Abstract

We examine the effect of stock liquidity on accruals-based earnings management. Finance literature suggests that stock liquidity leads to price efficiency. If prices are efficient, more future earnings should be reflected in current prices. Therefore, gain from shifting accruals across periods should be low and managers should have less incentive to manage earnings. We find that higher stock liquidity is associated with higher future earnings response coefficient and lower accruals-based earnings management. Our finding has important implication for the decline in accruals-based earnings management during 2001-2005 documented in prior study. Our additional trend analysis suggests that instead of SOX and other concurrent events, price efficiency improvement resulting from microstructure regime shifting (e.g., reduction in tick size from $1/16 to $1/100) may drive the decline in accruals-based earnings management during the period of 2001-2005.

Date

2012

Document Availability at the Time of Submission

Release the entire work immediately for access worldwide.

Committee Chair

Cheng, C.S. Agnes

DOI

10.31390/gradschool_dissertations.2788

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Accounting Commons

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