Earnings management to avoid earnings decreases and losses implies that the time series properties of the last quarter in the fiscal year differ from those of the other three quarters. We propose a simple parametric methodology to diagnose such differences. Application to a random sample of 390 firms in the Compustat database gives strong evidence of earnings management.

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Erasmus School of Economics
hdl.handle.net/1765/17346
Econometric Institute Research Papers
Report / Econometric Institute, Erasmus University Rotterdam
Erasmus School of Economics

Fok, D., & Franses, P. H. (2009). Testing Earning Management (No. EI 2009-31). Report / Econometric Institute, Erasmus University Rotterdam (pp. 1–21). Retrieved from http://hdl.handle.net/1765/17346