Full Citation

Title: Employee turnover likelihood and earnings management: evidence from the inevitable disclosure doctrine

Citation Type: Journal Article

Publication Year: 2018

ISBN:

ISSN:

DOI: 10.1007/s11142-018-9475-x

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PMCID:

PMID:

Abstract: We present evidence that managers consider employee turnover likelihood in their accounting choices. Our tests exploit U.S. state courts' staggered recognition of the inevitable disclosure doctrine (IDD), which reduces employees' ability to switch employers. We find a significant decrease in upward earnings management for firms headquartered in states that recognize the IDD, relative to firms headquartered elsewhere. The effect of the IDD is stronger for firms relying more on human capital and for firms whose employees have higher ex-ante turnover likelihood, confirming the employee retention channel. Overall, our results support the view that retaining employees is an important motive for corporate earnings management.

Url: https://doi.org/10.1007/s11142-018-9475-x

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Authors: Gao, Huasheng; Zhang, Huai; Zhang, Jin

Periodical (Full): Review of Accounting Studies

Issue: 4

Volume: 23

Pages: 1424-1470

Data Collections: IPUMS USA

Topics: Labor Force and Occupational Structure

Countries: United States