Performance matched discretionary accrual measures

S. P. Kothari*, Andrew J. Leone, Charles E. Wasley

*Corresponding author for this work

Research output: Contribution to journalArticle

2265 Scopus citations


We examine the specification and power of tests based on performance-matched discretionary accruals, and make comparisons with tests using traditional discretionary accrual measures (e.g., Jones and modified-Jones models). Performance matching on return on assets controls for the effect of performance on measured discretionary accruals. The results suggest that performance-matched discretionary accrual measures enhance the reliability of inferences from earnings management research when the hypothesis being tested does not imply that earnings management will vary with performance, or where the control firms are not expected to have engaged in earnings management.

Original languageEnglish (US)
Pages (from-to)163-197
Number of pages35
JournalJournal of Accounting and Economics
Issue number1
StatePublished - Feb 1 2005


  • Discretionary accruals
  • Discretionary-accruals models
  • Earnings management
  • Performance matching

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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