Abstract
We explore the association between real earnings management and the persistence of earnings and cash flows, respectively. Further, we investigate the effect of real earnings management on the relation between current stock returns and future earnings. Using 15,826 firm-year observations listed in the Korean stock market from 2000 to 2015, we find that real earnings management is negatively associated with the persistence of earnings. We also find that real earnings management restricts the persistence of cash flows. Lastly, we find that real earnings management prevents the market from assessing firms’ future earnings reflected in the current stock prices.
| Original language | English |
|---|---|
| Pages (from-to) | 2834-2850 |
| Number of pages | 17 |
| Journal | Emerging Markets Finance and Trade |
| Volume | 55 |
| Issue number | 12 |
| DOIs | |
| Publication status | Published - 26 Sept 2019 |
Bibliographical note
Publisher Copyright:©, Copyright © Taylor & Francis Group, LLC.
Keywords
- Cash flow persistence
- earnings persistence
- earnings quality
- future earnings response coefficient
- real earnings management
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