PINOCCHIO'S NOSE MAY BE GROWING: MISSTATEMENT RISK AT DISNEY
Shanhong Wu et al.
What the paper says
Disney has been the investors dream company for decades with its impressive revenue growth and profits to match. Recently, however, there have been media reports concerning the quality of the firm's financial statements. In this study, we apply the work of Dechow et al. (2011) to evaluate the likelihood that Disney may be manipulating its financial results. We found that Disney's accruals have been increasing and various performance measures have been deteriorating in recent years. The evidence has been consistent with the general finding that accruals are rising during misstatement years and manipulation is being used to mask deteriorating performance. We then applied Beneish (1999a) to calculate the likelihood of earnings manipulation. We found that Disney's probability of misstatement jumped significantly in 2019 and has passed the threshold to be identified as a manipulator for investors who face relative costs of Type I to Type II errors at around 20:1 or higher. Our results sound the alarm that further scrutiny by authorities of Disney's financial statements may be warranted.
Evidence weight
Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40
| F · citation impact | 0.00 × 0.4 = 0.00 |
| M · momentum | 0.20 × 0.15 = 0.03 |
| V · venue signal | 0.50 × 0.05 = 0.03 |
| R · text relevance † | 0.50 × 0.4 = 0.20 |
† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.