An experimental investigation of the effect of accounting discretion on the reporting of smooth increasing earnings by managers
Why this work is in the frame
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Bibliographic record
Abstract
Value-maximizing managers smooth earnings to communicate their firm’s value to shareholders. When accounting discretion is available, opportunistic managers are able to mimic the earnings patterns reported by value-maximizing managers. This paper reports an experiment that investigates (1) whether a reduction in accounting discretion leads to a separation in earnings series reported by opportunistic and value-maximizing managers, and (2) whether a reduction in accounting discretion impedes the ability of value-maximizing managers to communicate smooth increasing earnings to shareholders when operational smoothing variables are available. The study shows that a reduction in accounting discretion brings about a separation between the two types of managers because low discretion levels affect the reporting ability of opportunistic managers but not that of value-maximizing managers. Value-maximizing managers alter their operational strategies to overcome restrictions in accounting discretion in order to achieve their reporting objective.
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Full frame distilled prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. Learned from the 10,348 direct Codex labels and 10,348 direct Gemma labels. Candidate is the union of thresholded teacher heads; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels or direct frontier model labels.
Codex and Gemma teacher scores by category
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.001 | 0.001 |
| Meta-epidemiology (narrow) | 0.000 | 0.000 |
| Meta-epidemiology (broad) | 0.000 | 0.000 |
| Bibliometrics | 0.000 | 0.000 |
| Science and technology studies | 0.000 | 0.000 |
| Scholarly communication | 0.000 | 0.002 |
| Open science | 0.000 | 0.000 |
| Research integrity | 0.000 | 0.000 |
| Insufficient payload (model declined to judge) | 0.000 | 0.000 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from it