The Use of Extended Credit (Channel Stuffing) to Avoid Reporting Losses
Journal
Asia-Pacific Journal of Accounting and Economics
Journal Issue
15
Pages
161-181
Date Issued
2008-08
Author(s)
Abstract
This study investigates whether managers grant extended credit at the end of the fiscal year to accelerate customer purchases and thus avoid reporting losses. This study also considers whether this kind of earnings management affects the information content of reported earnings, and whether the unexpected accounts receivable (UAR)—a relatively reliable measure of management's exercise of channel stuffing over earnings—can provide incremental information about this phenomenon. Consistent with our hypotheses, we find that managers are likely to grant extended credit at the end of the fiscal year to meet their annual financial reporting targets.
SDGs
Type
journal article