News: Seminari

Seminar by Domenico Campa

Sala Seminari – I° piano, Palazzo Levi Cases, Via del Santo 33 - ore 12.30

03.05.2018

Seminar by Domenico Campa, International University of Monaco

Title: The Use of Asset Sales to Manage Earnings: Differences between UK and US Companies and between US GAAP and IFRS

Abstract: This paper examines the use of asset sales to manage earnings in the UK and the US. It also investigates differences between firms that report using US GAAP and firms that report using IFRS with regards to this type of earnings management. We find that UK and US companies use asset sales to manage earnings upward at the benchmark of zero earnings and this finding is robust to the opening leve! of net operating assets (NOA). UK firms use asset sales as part of a big bath strategy at the benchmark of zero earnings only in the absence of accruals toreverse. We find no evidence of US firms using asset sales as part of a big bath strategy and this finding is robust to the opening level of NOA and to any earnings benchmark investigated. Finally, there is no evidence asset sales being used for income smoothing in our sample of US and UK firms. We also use a sample of UK firms which cross-list in the US matched with a sample of US domestic firms to examine the impact of IFRS and US GAAP on asset sales as a method of real earnings management. The salient finding of this part of the study is that firms which operate in the US use asset sales to smooth earnings regardless of whether they are using IFRS or US GAAP. Overall our findings suggest that the regulatory environment and reporting incentives rather than the accounting standards are pivotal in the decision to use asset sales to manage earnings.