Investors, Take Heart When You See the Number 4 in Quarterly Earnings Figures


Managers have incentives to round up per-share earnings and doing so consistently “can signal an overall aggressive approach to financial reporting that could manifest itself in more-serious violations,” says Nadya Malenko, associate professor of finance at the University of Michigan. She conducted the research with Joseph Grundfest, professor of law and business at Stanford University and a former commissioner at the Securities and Exchange Commission, and Yao Shen, assistant professor of finance at Baruch College.


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