Document Type
Article
Abstract
We hypothesize that managers use their hierarchical role as reviewers of accounting judgments and estimates to manage earnings, which we call indirect earnings management (IEM). Across a series of experiments using highly experienced financial executives as participants, we provide evidence that IEM (1) is likely used by managers to achieve current and future earnings targets, (2) reduces both cognitive dissonance associated with managing earnings and the extent to which managers think that their behaviors constitute earnings management, and (3) is more likely to be used when corporate governance is strong than when corporate governance is weak. The results of this study suggest new directions for future research on earnings management and highlight the important role of the hierarchical structure of the accounting function in efforts to understand how earnings are managed.
Digital Object Identifier (DOI)
Publication Info
Published in Contemporay Accounting Research, Volume 42, Issue 4, Winter 2025, pages 2776-2798.
Rights
© 2025 The Author(s). Contemporary Accounting Research published by Wiley Periodicals LLC on behalf of Canadian Academic Accounting Association. This is an open access article under the terms of the Creative Commons Attribution License License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.
APA Citation
Jackson, S. B., Rasso, J. T., & Zimbelman, A. F. (2025). Indirect earnings management. Contemporary Accounting Research, 42(4), 2776–2798. https://doi.org/10.1111/1911-3846.70006