Earnings Management in Firms with Data Security Breaches

What is it about?

In this paper, we investigate the relationship between data security breaches and earnings management. We find that these firms are more likely to use real earnings management as opposed to discretionary accruals. This shows that these firms are concerned about poor financial performance due to breaches. This is important because thus far the literature documents few negative consequences of breaches. Our paper shows that these firms are clear concerned with negative effects.

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