Abstract
This study investigates the relationship between macroeconomic uncertainty and the lossavoidance behavior of managers. Given that loss avoidance behavior is motivated by the stock market, the relationship between macroeconomic uncertainty and loss avoidance is predicted to be both positive and negative. Thus, this study examines which type of relationship is observed on average. Using the Nikkei Stock Average Volatility Index as a proxy for macroeconomic uncertainty, the study compares the difference in the frequency distributions of ordinary income (i.e., income before special items and taxes) and pre-managed earnings (i.e., ordinary income after deducting discretionary accruals) between low- and high-uncertainty subsamples. Additionally, this study estimates fixed-effect logit models. These results reveal that lower probability of firms engage in loss avoidance behavior under high macroeconomic uncertainty.
