Do managers use securitisation gains for real manipulation purposes?

摘要

Recent corporate financial scandals show that managers, capital market intermediaries and financial statement users are unable to assess correctly the information disclosed by firms related to unconsolidated special purpose entities and securitisation transactions. In this paper, we present empirical evidence on the use of securitisation gains by firms for real manipulation of reported earnings. First, the estimation of the Heckman (1979) two-step selection model shows that securitisation gain is related to financial reporting determinants (leverage), economic determinants (free cash-flow and interest coverage ratio) corporate governance determinants (percent of shares owned by the CEO) and other control variables (firm sector and return on equity). Second, the estimation of the simultaneous equation approach using the seemingly unrelated regression (SURE) method (Zellner, 1962) shows that managers use discretionary accruals and securitisation gains as substitutes to manage their reported earnings. Additional analysis shows that securitisation gains are used for real smoothing purposes.