Causes of Earning Management

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Causes of Earning Management
Earning management is a human reaction to the usual rules to evaluate management performance. Nobody wants to be criticized owing to not to obtain the expected results.
We should focus on the way this performance is evaluated. If the "analysts" modify their rigid methods to other more sophisticated, that take in account that forecast are only forecasts, not prophecies, maybe managers will not to be so deeply tempted to manage the earnings figures.
It's not to justify an unethical behavior. I agree that it is. But we should try to remove the causes, and not only look at the emerging behaviour.

Paradoxically Overquantification in Management Education is Responsible
Jagdish B Acharya, Premium Member
Management education in general tries to appear "more" scientific and relies on facts and figures rather than opinions. In the process there is a rush to quantify all aspects of management with newer theories.
Statistics can and are quite often manipulated and result in earnings management and such flaws. Quantification is good, but it should supplement rather than replace values and opinions.
The descriptive behaviours of business and its promises should become an integral part of most mandatory accounting statements in a structured manner. When one commits something in plain language, hiding behind figures and possible errors in figures is reduced.
Greater commitment brings improvement in morality and reduction in possible immoral acts of omission and commission.
So in my opinion, proper mixing of figures and commitments will improve things.



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