Quarterly Earnings Distribution and Earnings Management
Earnings management of the listed company is a hidden rule in the capital market. Previous researches usually based on annual earnings are difficult to find when and how firms manage their earning during a fiscal year. Given that the fourth quarter affords the last opportunity of earnings management, the abnormal change in earnings of the fourth quarter is open to doubt. Based on the evidence from Chinese listed firms, we use the distribution approach and logistic regressions, and find that the discontinuities at zero in the earnings distribution may be induced by earnings management. Our findings help to forecast in what conditions firms are likely to manage their earnings.