Environmental uncertainty and managers' use of discretionary accruals

Dipankar Ghosh, Lori Olsen

Research output: Contribution to journalArticlepeer-review

119 Scopus citations


Although an organization's environmental uncertainty may induce greater variability in reported earnings, managers have incentives to reduce this variability. The flexibility accorded by generally accepted accounting principles (GAAP) provides managers the means to accomplish this via exercising discretion in recognizing accounting accruals. Thus, we examine the relation between managers' use of discretionary accruals and environmental uncertainty. Overall, evidence suggests managers use discretionary accruals to reduce the variability in reported earnings more when firms operate in high uncertainty.

Original languageEnglish
Pages (from-to)188-205
Number of pages18
JournalAccounting, Organizations and Society
Issue number2
StatePublished - Feb 2009


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