Problems replicating Roychowdhury (2006) on real activities manipulation

[joost impink]

Hi,

I am having trouble replicating Roychowdhury (2006) - Earnings management through real activities manipulation. Journal of Accounting and Economics (42) pp. 350-370. 

I have put my code online at https://github.com/JoostImpink/Roychowdhury2006.

In short, my sample size is much larger (64,000+ observations vs 21,000+ in the paper), the descriptive statistics are similar (my sample on average has smaller firms, so cash flows etc are a bit lower), but my regressions are hardly significant (coefficients are similar for models 1-3 in table 2, but I have higher standard errors). 

I like the measures of this paper and would like to use it, but I am probably overlooking something.

Thanks,

Joost

[Attila Balogh]

Joost,

While the original authors say they include “all firms in Compustat", perhaps they remove non-listed and OTC firms.

Are your results closer to the published paper if you filter on exchg in(11,12,14)?

You could also merge on comp.security (on gvkey and iid) and filter firms that are tpci in('0') to include firms with their common equity only.

 

Attila