Microsoft Word 2007 ichrie conference Proceedings Final-Final 06-06-07. doc

 
2007 Annual International CHRIE Conference & Exposition 
53
Table 1 
Annual Change in RevPar 
Year
RevPar
 Annual 
Change
 
1990 43.14 -2.92% 
1990 43.14 -2.92% 
1991 41.14 -4.63% 
1992 40.65 -1.20% 
1993 41.67 2.52% 
1994 43.03 3.25% 
1995 44.04 2.35% 
1996 44.56 1.17% 
1997 44.89 0.74% 
1998 45.59 1.56% 
1999 45.71 0.27% 
2000 46.9 2.61% 
2001 43.45 -7.35% 
2002 42.41 -2.40% 
2003 43.07 1.40% 
(Source) Linda Canina (2002) Cornell Hotel and Restaurant Administration Quarterly; Smith Travel Research/Pinnacle Advisory Group 2004 
Outlook
Dechow’s modified Jones model, which theorizes on the basis that earnings management is more likely to 
be detected when using total accrual approach as managers make adjustment on accounting variables such as 
depreciation methods or deferred tax accounts. However, the authors’ argument is that the earnings manipulation in 
the gaming industry is more likely to be detected using a current accrual approach as the gaming industry generates 
much greater portion of revenue in cash or cash equivalent. Consequently, it is expected that managers will find 
current assets more convenient to manage earnings. Moreover, as the majority of gaming operations are on cash or 
cash equivalent basis using chips and tokens (Greenlees, 1988), it is logical to assume that managers have more 
opportunities to manipulate earnings using cash and cash equivalents to make adjustment on current assets.
Burgsthler and Dichev (1997) find evidence that managers manipulate both cash flow from operation and changes in 
working capital to achieve increases in earnings. Thus, the authors develop the following hypothesis to address the 
second research objective. 
Ho2: Current accruals approach and total accrual approach measure the same magnitude of discretionary accruals.
Research Methods
Many earnings management studies examine managers’ use of discretionary accruals to observe reported 
income manipulation (Tsui 2003). Most researches adopt the concept of discretionary accruals as a proxy in 
detecting earnings management. As one of the primary goals of this study is to evaluate empirically the ability to 
identify a better measure in assessing earning management in the gaming industry, we employed two measure 
approaches in using discretionary accruals; Dechow’s modified Jones model using total accrual approach and 
Teoh’s current accrual approach.
In order to extract discretionary accruals, the authors use two regression equations from both literatures to 
make a comparison of mean differences in discretionary accruals from the two accruals approaches. The Dechow’s 
model employs the total accrual approach, which is computed by subtracting Net Operating Cash from Net Income 
and then regressed on independent variables; change in Revenue less change in Account Receivable and gross Plant, 
Property and Equipment. Each variable is scaled by the firm related lagged total assets to reduce heteroskedasticity 
and also to be consistent with the use in the accounting literature. 
Modified Jones Model:

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