Using Google Searches of Firm Products to Assess Revenue Quality and Detect Revenue Management

61 Pages Posted: 13 Oct 2018 Last revised: 13 Apr 2020

See all articles by Peng-Chia Chiu

Peng-Chia Chiu

The Chinese University of Hong Kong, Shenzhen

Siew Hong Teoh

UCLA Anderson School of Management

Yinglei Zhang

The Chinese University of Hong Kong (CUHK) - School of Accountancy

Xuan Huang

California State University, Long Beach

Date Written: April 10, 2020

Abstract

We present evidence that Google searches of firm products (SVI) provide information about firm sales, and that large deviations between reported sales growth and ΔSVI can detect low revenue quality. Firms with such large discrepancies — which we call MUP firms — have (a) low-quality revenues measured as sales growth persistence, (b) increases in accounts receivable, (c) lower allowance reserved for bad debts, and (d) higher upward revenue misstatements that are later subject to SEC enforcement actions, consistent with upward revenue manipulation. Investors do not adequately discount for MUP firms’ low quality of revenue surprises at the earnings announcement; the negative post-announcement return reaction is consistent with a market correction of the initial overvaluation from the upward revenue manipulation.

Keywords: Google Search, Financial Reporting Quality, Revenue Management and Fraud Detection, Nowcasting using Big Data, Auditing Revenues using Big Data, Market Efficiency

JEL Classification: M41, G14

Suggested Citation

Chiu, Peng-Chia and Teoh, Siew Hong and Zhang, Yinglei and Huang, Xuan, Using Google Searches of Firm Products to Assess Revenue Quality and Detect Revenue Management (April 10, 2020). Available at SSRN: https://ssrn.com/abstract=3252314 or http://dx.doi.org/10.2139/ssrn.3252314

Peng-Chia Chiu

The Chinese University of Hong Kong, Shenzhen ( email )

Siew Hong Teoh (Contact Author)

UCLA Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

HOME PAGE: http://www.anderson.ucla.edu/faculty-and-research/accounting/faculty/teoh

Yinglei Zhang

The Chinese University of Hong Kong (CUHK) - School of Accountancy ( email )

Shatin, N.T.
Hong Kong

Xuan Huang

California State University, Long Beach ( email )

1250 Bellflower Blvd
Long Beach, CA 90064
United States

Do you want regular updates from SSRN on Twitter?

Paper statistics

Downloads
527
Abstract Views
3,065
rank
73,362
PlumX Metrics