VOLUME XIV
SPRING 2006

AN EMPIRICAL EVALUATION OF EARNINGS MANAGEMENT TESTS
 
FRANCISCO POVEDA FUENTES
Universidad de Alicante
 
The accounting scandals that have tainted international capital markets in recent years have increased the relevance and current importance of earnings management research. Despite the increasing concern of capital market supervisors about the reliability and transparency of financial information, there is an information asymmetry between the insiders and outsiders of quoted firms that lets managers introduce discretional components into disclosed information. In this context, the present article tries to give Spanish capital market analysts and investors an estimation of the real size and power of the tests based on models that estimate the discretionary component of disclosed earnings.
 
Key words: accruals management, earnings management.
JEL classification: M41.

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