| This dissertation examines the hypothesized differences in earnings management (specifically incoming-smoothing) behavior by business strategy classification. Prior earnings management research has concentrated on documenting the mere existence of earnings manipulation. In support of that goal, previous studies examined very specific situations that earnings management was expected to occur. Contrary to the prior research, this dissertation uses business strategy as a “macro-level” variable in an effort to document differences in earnings management behavior in a more generalizable context than in previous studies.; Two prior studies in the earnings management literature (Belkaoui and Picur 1984 and Albrecht and Richardson 1990) found mixed results while attempting to document earnings management behavior using a typology that assigned firms into differing sectors of the economy. As a general contribution to the literature, this dissertation integrates business strategy, a qualitative management construct, into the financial accounting literature.; Using business strategy as a platform to highlight systematic differences in firm attributes, hypotheses are developed that predict differences in the firms' earnings response coefficients and, subsequently, the motivation to smooth income. A sample of 325 manufacturing firms is constructed for the six-year study period 1992 through 1997. The sample firms are classified by business strategy using a coding technique based on objective indicators of the firms' strategic orientation. As expected, the results provided evidence for a difference in the income-smoothing relationship between the strategy classifications, suggesting that business strategy represents a multifaceted construct that provides insight into earnings management behavior. |
