In addition to the determinants of the variation in the accruals model which are
considered in this study, managers may have incentives to manipulate earnings in
order to avoid earnings losses and earnings declines (Burgstahler and Dichev, 1997).
Accordingly, sample firms are partitioned according to whether their unmanaged
earning per share (before the performance-matched abnormal accruals) is negative or
below last year’s reported earnings per share[11]. We expect the incentives for
income-increasing earnings management to be particularly strong when the
unmanaged earnings numbers fall below target. The repeated analysis does not
support this conjecture. The unreported results are qualitatively the same as those
observed in Table II