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Lin, F, Guan, L and Fang, W (2009)

Heaping In Reported Earnings: Evidence from Monthly Financial Reports of Taiwanese Firms

Emerging Markets Finance & Trade / January–February 2011, Vol. 47, No. 2, pp. 62–73.

ISSN/ISBN: 1540-496X DOI: 10.2753/REE1540-496X470205

Abstract: Heaping is a phenomenon that reported numbers tend to appear in increments that are important due to cultural or other reasons. This study reports that heaping is present in monthly earnings reported by publicly-listed companies in Taiwan. We find that in addition to zero being an important reference point in the second place of earnings, five is also an important reference point for firms to achieve, suggesting that firms tend to report monthly earnings in increments of 5 in the first two places. In addition, we observe predominantly more zero in the third through fifth place of the monthly earnings, suggesting that the monthly earnings tend to be in increments of 10 in the first three, first four, and first five places. Monthly earnings in Taiwan are disclosed voluntarily. Compared to studies that examine the distribution of earnings that are reported mandatorily (i.e., quarterly and annually), monthly earnings exhibits a greater tendency to exceed the reference points represented by N×10k, achieving 5 in the second place, as well as more 0 in other places. We attribute this finding as greater degree of earnings management in monthly earnings.

@article{, title={Heaping in reported earnings: evidence from monthly financial reports of taiwanese firms}, author={Lin, Fengyi and Guan, Liming and Fang, Wenchang}, journal={Emerging Markets Finance and Trade}, volume={47}, number={2}, pages={62--73}, year={2011}, publisher={Taylor \& Francis}, ISSN={1540-496X}, DOI={10.2753/REE1540-496X470205}, }

Reference Type: Journal Article

Subject Area(s): Accounting