Rounding-up in reported EPS, behavioral thresholds, and earnings management
Reported earnings per share (EPS) are frequently rounded to the nearest cent. This paper provides evidence that firms manipulate earnings so that they can round-up and report one more cent of EPS. Specifically, we examine the digit immediately right of the decimal in the calculated EPS number expres...
| Main Authors: | , |
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| Format: | Journal Article |
| Language: | English |
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2013
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| Online Access: | https://hdl.handle.net/10356/100280 http://hdl.handle.net/10220/18186 |
| _version_ | 1811676708035624960 |
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| author | Das, Somnath Zhang, Huai |
| author2 | Nanyang Business School |
| author_facet | Nanyang Business School Das, Somnath Zhang, Huai |
| author_sort | Das, Somnath |
| collection | NTU |
| description | Reported earnings per share (EPS) are frequently rounded to the nearest cent. This paper provides evidence that firms manipulate earnings so that they can round-up and report one more cent of EPS. Specifically, we examine the digit immediately right of the decimal in the calculated EPS number expressed in cents. Evidence is presented that firms are more likely to round-up when managers ex ante expect rounding-up to meet analysts’ forecasts, report positive profits, or sustain recent performance. Further investigation provides evidence that working capital accruals are used to round-up EPS. |
| first_indexed | 2024-10-01T02:25:46Z |
| format | Journal Article |
| id | ntu-10356/100280 |
| institution | Nanyang Technological University |
| language | English |
| last_indexed | 2024-10-01T02:25:46Z |
| publishDate | 2013 |
| record_format | dspace |
| spelling | ntu-10356/1002802023-05-19T06:44:41Z Rounding-up in reported EPS, behavioral thresholds, and earnings management Das, Somnath Zhang, Huai Nanyang Business School DRNTU::Business::Accounting::Valuation Reported earnings per share (EPS) are frequently rounded to the nearest cent. This paper provides evidence that firms manipulate earnings so that they can round-up and report one more cent of EPS. Specifically, we examine the digit immediately right of the decimal in the calculated EPS number expressed in cents. Evidence is presented that firms are more likely to round-up when managers ex ante expect rounding-up to meet analysts’ forecasts, report positive profits, or sustain recent performance. Further investigation provides evidence that working capital accruals are used to round-up EPS. Accepted version 2013-12-10T01:45:03Z 2019-12-06T20:19:36Z 2013-12-10T01:45:03Z 2019-12-06T20:19:36Z 2003 2003 Journal Article Das, S., & Zhang, H. (2003). Rounding-up in reported EPS, behavioral thresholds, and earnings management. Journal of Accounting and Economics, 35(1), 31-50. 0165-4101 https://hdl.handle.net/10356/100280 http://hdl.handle.net/10220/18186 10.1016/S0165-4101(02)00096-4 en Journal of accounting and economics © 2003 Elsevier B.V. This is the author created version of a work that has been peer reviewed and accepted for publication by Journal of Accounting and Economics, Elsevier B.V. It incorporates referee’s comments but changes resulting from the publishing process, such as copyediting, structural formatting, may not be reflected in this document. The published version is available at: [DOI:http://dx.doi.org/10.1016/S0165-4101(02)00096-4 ]. 20 p. application/pdf |
| spellingShingle | DRNTU::Business::Accounting::Valuation Das, Somnath Zhang, Huai Rounding-up in reported EPS, behavioral thresholds, and earnings management |
| title | Rounding-up in reported EPS, behavioral thresholds, and earnings management |
| title_full | Rounding-up in reported EPS, behavioral thresholds, and earnings management |
| title_fullStr | Rounding-up in reported EPS, behavioral thresholds, and earnings management |
| title_full_unstemmed | Rounding-up in reported EPS, behavioral thresholds, and earnings management |
| title_short | Rounding-up in reported EPS, behavioral thresholds, and earnings management |
| title_sort | rounding up in reported eps behavioral thresholds and earnings management |
| topic | DRNTU::Business::Accounting::Valuation |
| url | https://hdl.handle.net/10356/100280 http://hdl.handle.net/10220/18186 |
| work_keys_str_mv | AT dassomnath roundingupinreportedepsbehavioralthresholdsandearningsmanagement AT zhanghuai roundingupinreportedepsbehavioralthresholdsandearningsmanagement |