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The Accounting Review

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Earnings Management Strategies and the Trade-Off between Tax Benefits and Detection Risk: To Conform or Not to Conform?
ABSTRACT: Prior research has separately examined pretax earnings management activities that have current taxable income consequences (book-tax “conforming earnings management”) and those t...

Real Options and Escalation of Commitment: A Behavioral Analysis of Capital Investment Decisions
ABSTRACT: This study uses experimental methods to explore whether incorporating real options into net present value analysis can reduce escalation of commitment, or the tendency of decision makers to ...

The Accounting Review / Volume 84 / Issue 1 / OTHER ARTICLES

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Do Managers Time Securitization Transactions to Obtain Accounting Benefits?

The Accounting Review 84 (1), 99 (2009);
doi: 10.2308/accr.2009.84.1.99

ABSTRACT

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Patricia M. Dechow
University of California, Berkeley.

Catherine Shakespear
University of Michigan.

ABSTRACT: Relative to recording securitizations as collateralized borrowings, the “gain on sale” treatment has several accounting benefits such as reducing leverage, increasing earnings, and improving efficiency. We investigate whether managers engage in real transaction management to take advantages of these benefits. We predict that in order to maximize financial statement window-dressing, managers will engage in securitizations toward the end of the quarter. We find that 41 percent of the quarter's transactions occur in the third month of the quarter and almost half of these occur in the last five days of the quarter. In addition, we show that when firms report securitization gains sufficient to beat earnings thresholds, the securitization transactions are more likely to have occurred in the last five days of the quarter. We also document that the impact of securitizations on leverage is large and material for many firms. Our results suggest that window-dressing the financial statements appears to be a valuable side-benefit of engaging in securitization transactions. ©2009 American Accounting Association

History: | Submitted September 2006; accepted July 2008; published January 2009

Permalink:

http://link.aip.org/link/ACRVAS/v84/i1/p99/s1

ERRATUM

Erratum

The Accounting Review 84, 1007 (2009)

PUBLICATION DATA

ISSN:

0001-4826 (print)   1558-7967 (online)

Publisher:

American Accounting Association

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