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Earnings management in response to regulatory price review. A case study of the political cost hypothesis in the water and electricity sectors in England and Wales

Beekes, W A (2003) Earnings management in response to regulatory price review. A case study of the political cost hypothesis in the water and electricity sectors in England and Wales. Working Paper. The Department of Accounting and Finance, Lancaster University.

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    Abstract

    This paper examines the response of the water and electricity group companies to regulatory pressure and in particular, the first regulatory price review after privatisation. The sample period incorporates industry-specific regulatory price reviews in both the water and electricity sectors and provides an interesting case study to examine the political cost hypothesis. The results obtained in this study confirm that the regulatory process has an impact on the group company's financial reporting decisions: there is evidence of income-decreasing earnings management in the year of regulatory price review in both sectors. However there is little evidence to support the premise of income-decreasing earnings management in the electricity sector, following the regulator's decision to re-open the distribution price review in 1995.

    Item Type: Monograph (Working Paper)
    Uncontrolled Keywords: Accounting accruals ; earnings management ; price cap regulation ; regulatory review ; regional electricity companies ; water and sewerage companies
    Subjects: UNSPECIFIED
    Departments: Lancaster University Management School > Accounting & Finance
    ID Code: 48663
    Deposited By: ep_importer_pure
    Deposited On: 11 Jul 2011 22:05
    Refereed?: No
    Published?: Published
    Last Modified: 17 Sep 2013 18:25
    Identification Number:
    URI: http://eprints.lancs.ac.uk/id/eprint/48663

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