Additional flashcards

1
Q

The management obfuscation hypothesis

A

Predicts that self-interested managers opportunistically choose information

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2
Q

Pay-performance sensitivity

A

The strength of incentives

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3
Q

Earnings management can be

A

Real

Accruals-based

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4
Q

What does it mean that accruals reverse?

A

Accountants cannot “create” or “destroy” revenues and expenses, they can only move them between periods. Which means understating expenses in this period will result in an overstatement in a future period.

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