tailieunhanh - An Investigation of Earnings Management through Marketing Actions

Smaller markets are faring better for a couple reasons. They were spared the fierce price wars which undercut big markets over the last two decades, as big radio groups battled for market share in major metro areas. In addition, small market stations often have closer relationships with local advertisers that tend to be more conservative in their media strategies. Aside from small markets, online is one of the few bright spots for radio, although its contribution to total revenue remains relatively small. In the first half of 2008, the off-air ad category, which includes online, grew. | HARVARD BUSINESS SCHOOL An Investigation of Earnings Management through Marketing Actions Craig J. Chapman Thomas J. Steenburgh Working Paper 08-073 Copyright 2008 2009 2010 by Craig J. Chapman and Thomas J. Steenburgh Working papers are in draft form. This working paper is distributed for purposes of comment and discussion only. It may not be reproduced without permission of the copyright holder. Copies of working papers are available from the author. AN INVESTIGATION OF EARNINGS MANAGEMENT THROUGH MARKETING ACTIONS1 Craig J. Chapman2 Thomas J. Steenburgh3 Harvard Business School Working Paper No. 08-073 Draft July 16 2010 Abstract Prior research hypothesizes managers use real actions including the reduction of discretionary expenditures to manage earnings to meet or beat key benchmarks. This paper examines this hypothesis by testing how different types of marketing expenditures are used to boost earnings for a durable commodity consumer product which can be easily stockpiled by end-consumers. Combining supermarket scanner data with firm-level financial data we find evidence that differs from prior literature. Instead of reducing expenditures to boost earnings soup manufacturers roughly double the frequency and change the mix of marketing promotions price discounts feature advertisements and aisle displays at the fiscal quarter-end when they have greater incentive to boost earnings. 1 We thank the James M. Kilts Center GSB University of Chicago for data used in this study and also Dennis Chambers Paul Healy VG Narayanan two anonymous referees and seminar participants at the Harvard Business School the Massachusetts Institute of Technology the London Business School Transatlantic Conference and the AAA FARS 2007 Conference for their helpful comments on the paper. 2 Kellogg School of Management Northwestern University c-chapman@ 3 Harvard Business School Our results confirm managers stated willingness to sacrifice long-term value in order to