Title Page
Contents
국문초록 10
Abstract 12
I. INTRODUCTION 14
II. LITERATURE REVIEW AND HYPOTHESES DEVELPOMENT 25
2.1. Literature Review 25
2.1.1. Real activities manipulation 25
2.1.2. Real activities manipulation and subsequence performance 30
2.1.3. Accrual-based earnings management and response of the capital market 33
2.1.4. Accrual-based earnings management and response of the capital market 35
2.1.5. Real activities manipulation and response of the capital market 36
2.2. Hypotheses development 37
III. Data and Methodology 43
3.1. Data 43
3.1. Measurement of variables 44
3.2.1. Real activities manipulation 44
3.2.2. Accrual-based earnings management 47
3.2. Descriptive statistics 48
IV. EMPIRICAL RESULTS 55
4.1. Future operating performance 55
4.2. Analyst forecasts analysis 60
4.3. Suspect firm-year analysis 76
4.3.1. Future operating performance using suspect firm-years 82
4.3.2. Analyst forecast analysis using suspect firm-years 85
4.4. Comparison between real activities manipulation and accrual-based earnings management 93
4.5. Sensitivity analysis 103
4.5.1. Multivariate test including control variables 103
4.5.2. Aggregated real activities manipulation proxy 110
4.5.3. Alternative measure for real activities manipulation proxy: Abnormal research and development expenses (R&D) 113
4.5.4. Alternative measure for analyst forecast errors 116
V. CONCLUSION 117
REFERENCES 121
Table 1. Measurement of real activities manipulation and accrual-based earnings management 50
Table 2. Descriptive statistics 52
Table 3. Pearson correlations 54
Table 4. Subsequent firm performance 59
Table 5. Ordinary least squares regressions of forecast errors on real activities manipulation... 72
Table 6. Ordinary least squares regressions of forecast errors on real activities manipulation... 73
Table 7. Ordinary least squares regressions of forecast errors on real activities manipulation... 74
Table 8. Ordinary least squares regressions of forecast errors on real activities manipulation... 75
Table 9. Descriptive statistics for suspect firm-years that just meet or slightly beat last year's... 78
Table 10. Suspect firm-years that meet or beat earnings benchmarks 81
Table 11. Subsequent firm performance analysis using suspect firm-years that just meet... 84
Table 12. Two by two analysis of analyst forecast errors partitioned by... 96
Table 13. Multivariate regressions of forecast errors on real activities manipulation... 107
Table 14. Multivariate regressions of forecast errors on real activities manipulation... 108
Table 15. Multivariate regressions of forecast errors on real activities manipulation... 109
Table 16. Ordinary least squares regressions of forecast errors on real activities manipulation... 111
Figure 1. Monthly analyst forecast errors for AbCFO portfolio following the prior... 63
Figure 2. Monthly analyst forecast errors for AbDISX portfolio following the prior... 65
Figure 3. Monthly analyst forecast errors for AbPROD portfolio following the prior... 67
Figure 4. Monthly analyst forecast errors for DAC portfolio following the prior... 68
Figure 5. Monthly analyst forecast errors for AbCFO portfolio following the prior... 89
Figure 6. Monthly analyst forecast errors for AbDISX portfolio following the prior... 90
Figure 7. Monthly analyst forecast errors for AbPROD portfolio following the prior... 91
Figure 8. Monthly analyst forecast errors for DAC portfolio following the prior... 92
Figure 9. Monthly analyst forecast errors for two by two samples... 100
Figure 10. Monthly analyst forecast errors for two by two samples... 101
Figure 11. Monthly analyst forecast errors for two by two samples... 102
Figure 12. Monthly analyst forecast errors for RM_proxy portfolio following the prior... 112
Figure 13. Monthly analyst forecast errors for AbRD portfolio following the prior... 115