Earnings Management and Accounting income Aggregation

John Jacob*, Bjørn N. Jørgensen

*Corresponding author for this work

Research output: Contribution to journalJournal articleResearchpeer-review


Quarterly earnings allow aggregation into annual earnings in four different ways. Fiscal year earnings is one measure of annual earnings, the others being earnings for annual periods ending at interim quarter-ends. We investigate earnings management in fiscal year earnings relative to these alternative measures of firms’ annual earnings. We confirm prior findings in Burgstahler and Dichev (1997. Earnings management to avoid earnings decreases and losses. Journal of Accounting and Economics 24, 99–126) of discontinuities around zero and prior year earnings in histograms of earnings. Subsequent research questions whether these discontinuities are evidence of earnings management. Using histograms of our alternative annual earnings measures, we offer evidence suggesting earnings management is responsible for the discontinuities.
Original languageEnglish
JournalJournal of Accounting and Economics
Issue number2-3
Pages (from-to)369-390
Number of pages22
Publication statusPublished - Jul 2007
Externally publishedYes


  • Earnings management
  • Earnings thresholds
  • Earnings distributions
  • Discontinuities

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