Abstract
This paper examines the value-relevance of primary accounting information and the size of earnings management concurrently for high-tech versus low-tech firms. Specifically, the results reveal that earnings and changes in earnings of high-tech firms reflect lower levels of security price reactions and associations than those of low-tech firms. In addition, consistent with evidence from prior research, greater levels of earnings management, measured by modified Jones and performance-matched discretionary accruals (proxies for earnings management), exist for high-tech firms vis-à-vis low-tech firms over the sample period. More importantly, this paper also documents that the association between cumulative adjusted returns and key financial variables, including earnings, changes in earnings, sales, and changes in sales, remains weaker for high-tech firms than for low-tech firms even after levels of earnings management have been controlled for.
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