Ronald E. McNair Program


Shametra Collins
 School: Alcorn State University
Major: Accounting
Mentor: Dr. J Riley Shaw
Expected Graduation Date: May 2005
Organizations and Activities:
  • Delta Mu Delta National Honors Society in Business
  • Ronald McNair Scholar
  • (SIFE) Students in Free Enterprises
  • National Dean’s Scholar
  • America Society of Women’s Accountant Scholar
E-MAIL: shametracollins@aol.com

COMMENTS:
I have enjoyed being a part of the University of Mississippi’s Ronald McNair Program. I had an opportunity to learn so much new information. My mentor worked with me daily so that I could do a great job on my presentation and research paper. Again, thanks for selecting me to be a participant in this program and I would recommend more people to participate in this program.

 

ABSTRACT

The Earnings Management Practices of Firms that Report Pro Forma Earnings


This research attempts to find out if managers of firms that report pro forma earnings aggressively manage their GAAP earnings .  Recently, there has been an increasing trend in companies providing a supplemental measure of their performance, pro forma earnings.  Commentators believe that companies are issuing pro forma earnings announcements to make investors believe that they are performing better than their GAAP earnings would indicate.  

Samples of firms that issue pro forma earnings announcements were gathered and matched to a control set.  The earnings management of these two samples was compared using discretionary accruals as the proxy for earnings management.  Discretionary accruals were estimated by using the modified-Jones (1991) model of discretionary accruals.  

The results indicate that there is no difference in the earnings management of the pro forma reporters and the firms that did not issue pro forma earnings announcements.  This result could be because the pro forma announcers did not need to rely on earnings management techniques because they believed investors would respond to their pro forma earnings.  Alternatively, the lack of results could be because earnings management existed in both samples.  Future research could expand the samples tested and the years observed to provide further evidence.