This is my first post here, and I hope to find an answer to my question.
I have found a paper that examines the relationship between earnings management (absolute value of the abnormal working capital accrual) and IFRS.
I have noticed that the author divided the earnings management by the beginning total assets. Further, the control variables include leverage which is the total debt divided by the current year's total assets, CFO which is the cash flow from operating activities divided by the beginning total assets, and ROA which is the operating profit divided by the beginning total assets. Firm size is the log of total assets for the current year.
For other papers, I have found that most of the past paper didn’t show a consistent approach, I mean some of them divided the earnings management and CFO on the current year of total assets, while divided the ROA on the previous year of total assets and used the log of total assets of the previous year.
So, I am wondering why, I mean is there any statistical issue behind that?
Can I scale the variables on the beginning and current total assets randomly in a way that serves the results, or do you think there is a benchmark for this?