Santanu Mitra publishes in top finance and accounting journal
Wayne State University accounting professor Santanu Mitra’s paper, “Does late 10K filing impact companies’ financial reporting strategy? Evidence from discretionary accruals and real transaction management” has been accepted for publication in the Journal of Business Finance and Accounting. The Journal of Business Finance & Accounting is a peer-reviewed academic journal published by John Wiley & Sons that covers accounting, corporate finance and corporate governance. The paper was co-authored with Talal Al-Hayale of University of Windsor, Canada and Mahmud Hossain of American University of Sharjah, United Arab Emirates.
“The study investigates how late 10K filers adapt their financial reporting strategy in the post–late filing period in their response to bad publicity, negative market sentiment and higher stakeholders’ scrutiny resulting from reporting delays. Both the level and change regressions show that the late 10K filers significantly reduce the use of discretionary accruals from pre- to post-late filing year. However, they simultaneously increase real transaction management over the same time-period. The trade-offs between the two earnings management techniques are more prominent when the late filers have a strong incentive to meet or beat earnings benchmarks. Our primary results are robust when late filings are caused by accounting, auditing and internal control issues, and when the late filers cited no meaningful reason for late 10K filings. It is further evident that the late filers with material internal control weaknesses and the late filers that subsequently restate their financial statements make relatively higher trade-offs than the matched non-late filers. Finally, the trade-offs between reduced accruals and increased real transaction management are stronger for the accelerated filers, and for the late filers audited by Big 4 auditors.”