Description
Although an organization’s environmental uncertainty may induce greater variability in reported earnings, managers
have incentives to reduce this variability. The flexibility accorded by generally accepted accounting principles (GAAP) provides
managers the means to accomplish this via exercising discretion in recognizing accounting accruals. Thus, we examine
the relation between managers’ use of discretionary accruals and environmental uncertainty. Overall, evidence suggests
managers use discretionary accruals to reduce the variability in reported earnings more when firms operate in high
uncertainty.
doc_446976912.pdf
Although an organization’s environmental uncertainty may induce greater variability in reported earnings, managers
have incentives to reduce this variability. The flexibility accorded by generally accepted accounting principles (GAAP) provides
managers the means to accomplish this via exercising discretion in recognizing accounting accruals. Thus, we examine
the relation between managers’ use of discretionary accruals and environmental uncertainty. Overall, evidence suggests
managers use discretionary accruals to reduce the variability in reported earnings more when firms operate in high
uncertainty.
doc_446976912.pdf