Earnings Manipulation and Predicting Stock Returns

Open Access
Author:
Pattarkine, Uma Vikram
Area of Honors:
Interdisciplinary in Accounting and Finance
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
  • Edward Eugene Babcock Jr., Thesis Supervisor
  • James Alan Miles, Honors Advisor
  • Orie Edwin Barron, Honors Advisor
Keywords:
  • Earnings manipulation
  • stock returns
  • Fama French
  • Carhart
  • M-Score
  • dot-com bubble
Abstract:
This study investigates earnings manipulation in the telecommunications industry in the early 2000s and evaluates whether an accounting-based earnings manipulation model (M-Score) could accurately flag manipulators before they were required to restate earnings by the Securities and Exchange Commission. The M-Score, coupled with the three Fama-French factors and the Carhart momentum factor, could also predict future stock returns.