Does the Use of Financial Derivatives Affect Earnings Management Decisions?
by Jan Barton Goizueta Business School – Emory University January 22, 2000 Abstract I examine the effects of derivatives use on earnings management behavior. I develop a self-selection simultaneous-equations model that captures managers’ incentives to use derivatives and manage discretionary accruals. Empirical results from estimating the model on 1994-1996 data for a sample of 304 Fortune 500 firms indicate that firms with larger derivatives portfolios have lower levels of discretionary accruals…
