Earnings management drives asymmetry in news recognition, impacting accounting accuracy.
Earnings management practices can influence how conservative companies are with their reported earnings. When companies use negative discretionary accruals, it can make their earnings look worse during bad times and better during good times. This can affect how investors react to the company's financial news. By looking at true earnings (earnings minus discretionary accruals), we can see a clearer picture of how conservative companies are with their earnings. This could impact studies comparing earnings conservatism across different accounting systems.