Abstract
This paper analyzes the relationship between earnings management and insider trading, specifically investigating whether discretionary accruals are related to insider trading and valuation. We find strong evidence of insiders managing earnings downward when buying and managing earnings upward when selling. On the marginal basis, value (high book-to-market value) firms manage their earnings upward compared to growth (low book-to-market value) firms, consistent with a signaling hypothesis. However, the opposite is true on the average basis, consistent with an opportunistic hypothesis.
| Original language | English |
|---|---|
| Pages (from-to) | 331-346 |
| Number of pages | 16 |
| Journal | Journal of Business Finance and Accounting |
| Volume | 35 |
| Issue number | 3-4 |
| DOIs | |
| Publication status | Published - Apr 2008 |
| Externally published | Yes |
ASJC Scopus Subject Areas
- Accounting
- Business, Management and Accounting (miscellaneous)
- Finance