Earnings manipulation and the cost of capital

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Reference no: EM131133231

FINANCE SHORT PAPER

I have chosen to write on Earnings manipulation and cost of Capital and I have selected the article below for the topic.

Strobl, G. (2013). Earnings Manipulation and the Cost of Capital. Journal of Accounting Research, 51(2), 449 from business source complete.

This paper examines the role of earnings management in affecting a firm's cost of capital. Using an agency model with multiple firms whose cash flows are correlated, it demonstrates the extent of earnings manipulation which varies across the business cycle. Depending on a firm's earnings profile, it can have stronger incentives to overstate its performance in good times or in bad times. Because of this dependence on the state of the economy, earnings manipulation can influence a firm's cost of capital despite the forces of diversification

The discussion paper should summarize and analyze the main points put forward in the paper/article. Each paper will be a minimum of 4-6 double spaced pages and be based on a journal article of the approved student's choice. Exceptional work would include additional research and thoughtful synthesis of the authors' ideas with your ideas. You should choose an article that focuses on financial management with a valuation component with references. I tend to be pretty lenient here, but your grade will be affected by the degree that there is a distinct valuation component.

The paper will be graded using the following Rubric:

Reference no: EM131133231

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