Research Abstracts
Latest Published Work by Merage School Faculty Members
Accounting Professor Elizabeth Chuk Title: “What Have We Learned About Earnings Management? Integrating Discontinuity Evidence” Co-authors: Dave Burgstahler Accepted at: Contemporary Accounting Research The accounting literature includes numerous examples of discontinuities at prominent benchmarks that are widely interpreted as evidence that earnings are managed to meet those benchmarks. However, there are a few examples where discontinuities do not exist, which are sometimes interpreted as inconsistent with earnings management. Alternative explanations for discontinuities have also been suggested. This paper reviews, evaluates, and integrates the available evidence and concludes that the theory that earnings are managed to meet benchmarks provides the simplest and most complete explanation for the body of discontinuity-related evidence.
20 UCI PAUL MERAGE SCHOOL OF BUSINESS
Professor Radhika Lunawat Title: “Reputation Effects of Information Sharing” Accepted at: Journal of Economic Behavior & Organization This paper analyzes a model of investment and return in an economy characterized by information asymmetry between an investor and a manager. The realized value of the uncertain state RI QDWXUH LV WKH PDQDJHU·V SULYDWH LQIRUPDWLRQ 7KH SDSHU ÀUVW FRQVLGHUV DQ HFRQRP\ ZKHUH WKH manager cannot share her private information with the investor. Therefore, dividend payment is the only reputation building tool available to the PDQDJHU ,I WKH LQYHVWRU·V SULRU EHOLHIV DERXW WKH PDQDJHU·V WUXVWZRUWKLQHVV DUH VXIÀFLHQWO\ KLJK then the manager will return a dividend consistent with the lower possible state of nature having occurred and the investor will revise such beliefs downwards. However, if the beliefs are not so high, then the equilibrium will be mixed strategies. The paper then compares such a dividendonly economy with one where information sharing is an additional tool available for building reputation. Information sharing disciplines the potential opportunism accruing to a manager out of her informational advantage. It provides ex SRVW YHULÀDELOLW\ RI WKH VWDWH RI QDWXUH DQG WKHUHE\ REYLDWHV GRZQZDUG UHYLVLRQ RI DQ LQYHVWRU·V SULRU EHOLHIV DERXW D PDQDJHU·V WUXVWZRUWKLQHVV 7KLV results in a greater region of pure strategy play in the dividend-and-information-sharing economy. Since such pure strategy play implies investment
