Download or read book The Dynamics of Earnings Forecast Management written by Dan Bernhardt and published by . This book was released on 2003 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates whether firms manage analyst forecasts to generate positive earnings surprises and the consequences of such forecast management. We first document that firms quot;talk downquot; forecasts. Forecasts of quarterly earnings issued later in the forecasting horizon grow increasingly pessimistic on average. More importantly, the exact timing of changes in earnings forecasts turn out to be a key determinant of whether a firm indeed succeeds at generating positive earnings surprises. In particular, (i) changes in consensus early in the forecast horizon have no effect on the probability that earnings will exceed the consensus, (ii) late forecasts that raise the consensus sharply reduce the probability of a positive earnings surprise, and (iii) late forecasts that lower the consensus sharply raise the probability of a positive earnings surprise. These last two findings are the opposite of what would be predicted if deviations of late forecasts from the consensus were due to new information arrival. We then find evidence that investors are systematically quot;misledquot; by late arriving forecasts. In particular, downward revisions in the consensus lead to large positive cumulative abnormal returns following the earnings announcement. Finally, while the finding that investors reward firms that successfully manage forecasts down might seem to provide a rationale for downward forecast management, this is not so. Specifically, controlling for the extant earnings-consensus forecast differential, the negative impact of downward forecast revisions on stock price dominates the stock price appreciation following the earnings announcement. This begs the question: Firms manage analyst forecasts (down), but why?

Download or read book Earnings Forecast Earnings Management and Asymmetric Price Response written by Baohua Xin and published by ProQuest. This book was released on 2008 with total page 144 pages. Available in PDF, EPUB and Kindle. Book excerpt: The empirical evidence on earnings management and the corresponding stock price response to earnings announcements has consistently uncovered two important regularities: Missing an earnings target triggers a large and disproportionate negative stock price response, while exceeding such a target meets with only a moderate increase in stock price; and firms seem to manipulate and stretch their announced earnings in order to meet or beat earnings targets. I seek a rational explanation that connects these regularities by formulating an analytical model of earnings forecasts, mandatory earnings announcements and stock price behavior. I show that there is a kink in the distribution of reported earnings located close to but to the left of the earnings forecast. I also show the equilibrium stock price schedule is much steeper when reported earnings lie below the forecast than when reported earnings lie above the forecast. Additionally, there is a discrete jump in the stock price when reported earnings equal the forecast. These results help shed light on many puzzling empirical findings.

Download or read book Earnings Management written by Joshua Ronen and published by Springer Science & Business Media. This book was released on 2008-08-06 with total page 587 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book is a study of earnings management, aimed at scholars and professionals in accounting, finance, economics, and law. The authors address research questions including: Why are earnings so important that firms feel compelled to manipulate them? What set of circumstances will induce earnings management? How will the interaction among management, boards of directors, investors, employees, suppliers, customers and regulators affect earnings management? How to design empirical research addressing earnings management? What are the limitations and strengths of current empirical models?

Download or read book Introduction to Earnings Management written by Malek El Diri and published by Springer. This book was released on 2017-08-20 with total page 120 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book provides researchers and scholars with a comprehensive and up-to-date analysis of earnings management theory and literature. While it raises new questions for future research, the book can be also helpful to other parties who rely on financial reporting in making decisions like regulators, policy makers, shareholders, investors, and gatekeepers e.g., auditors and analysts. The book summarizes the existing literature and provides insight into new areas of research such as the differences between earnings management, fraud, earnings quality, impression management, and expectation management; the trade-off between earnings management activities; the special measures of earnings management; and the classification of earnings management motives based on a comprehensive theoretical framework.

Download or read book An Empirical Test of Learning in Management Earnings Forecasts written by Yuan Shi (Ph.D.) and published by . This book was released on 2019 with total page 98 pages. Available in PDF, EPUB and Kindle. Book excerpt: My dissertation examines whether managers issuing earnings guidance learn from the forecast errors in prior earnings guidance issued by them. Using data on quarterly earnings forecasts issued by managers during the period from 2001 to 2016, I find results that are consistent with managers learning from their previous forecast errors to improve their forecast accuracy. However, the intensity of the managers' reactions to previous forecast errors is asymmetric. Consistent with prior literature that emphasizes the importance of meeting or beating forecasts for managers, certain managers that miss their own forecasts tend to be conservative enough in their future forecasts to avoid missing their own forecasts again. However, as expected, when the managers have met or beaten their previous forecasts, they have a smaller forecast error, but they still beat their previous forecasts. Additional analysis suggests that these effects persist even after controlling for potential earnings management to achieve these earnings targets. I also examine the impact of managerial attributes and board governance characteristics on the learning process. My analysis suggests that while CEO overconfidence and CFO overconfidence appear to impede learning, Managerial ability, CEO duality and outside CEO(s) as director(s) strengthen the learning effect. My findings shed light on an important aspect of management guidance and may have implications for users of this information such as financial analysts and investors.

Download or read book Management Earnings Forecasts written by Hwa Deuk Yi and published by . This book was released on 1994 with total page 236 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Earnings Management and Forecast Guidance as Mechanisms to Meet Or Beat Analysts Earnings Forecasts written by Lixin Su and published by . This book was released on 2005 with total page 326 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Management Earnings Forecast Issuance and Earnings Surprises written by T. Sabri Oncu and published by . This book was released on 2019 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the impact of firms' public management guidance on their ability to meet or beat analysts' consensus forecasts. The model set forth here accounts for endogeneity of firms' management earnings forecast issuance to examine whether their public management guidance raises their probability of generating favorable earnings surprises. In addition, the model allows for state dependence to investigate whether the firms' past outcomes have any impact on the probabilities of their meeting or beating analysts' consensus forecasts and management forecast issuance. Based on a panel dataset of 1,807 firms and 28,031 firm-quarters between 1994 and 2002, I find the following: Firstly, firms that meet or beat their own management forecast are more likely to meet or beat the analysts' consensus forecast. Secondly, firms with a long history of meeting or beating the analysts' consensus forecasts are more likely to repeat their previous performance. Thirdly, firms with a long history of meeting or beating their own forecasts are more likely to issue management forecasts that they can meet or beat. And lastly, firms with a long history of meeting or beating analysts' consensus forecasts are more likely to issue management forecasts that they can meet or beat. The evidence presented in this paper suggests that not only firms' public management guidance but also their past outcomes play an important role in their ability to generate favorable earnings surprises.

Download or read book Public Disclosure of Corporate Earnings Forecasts written by Francis A. Lees and published by . This book was released on 1981 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Opportunistic Earnings Management and Management Earnings Forecast Likelihood written by Haeyoung Shin and published by . This book was released on 2007 with total page 150 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Association Between Management Earnings Forecast Errors and Accruals written by Guojin Gong and published by . This book was released on 2008 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate the association between errors in management forecasts of subsequent year earnings and current year accruals. In an uncertain operating environment, managers' assessments of their firms' business prospects are imperfect. Since managers' imperfect business assessments influence both accruals generation and earnings projection, we hypothesize that management earnings forecasts exhibit greater optimism (pessimism) when accruals are relatively high (low). Consistent with this hypothesis, we find a positive association between management earnings forecast errors and accruals. This positive association is stronger for firms operating in a more uncertain business environment and for firms in industries exhibiting greater covariation between accruals and growth-related activities. Moreover, this positive association is significant when accruals likely reflect managers' true beliefs about firms' business prospects, but is nonexistent when accruals are likely manipulated to boost managers' trading gains. Supplementary analysis reveals that the presence of management earnings forecasts does not significantly reduce accrual mispricing.

Download or read book Analysts Response to Earnings Management written by Xiaohui Liu and published by . This book was released on 2004 with total page 91 pages. Available in PDF, EPUB and Kindle. Book excerpt: Previous literature studies analysts' earnings forecasts without considering firms' response to analysts' forecasts. This study improves upon previous research by considering firms' earnings management with respect to analysts' forecasts. I hypothesize that analysts understand these earnings management practices, and incorporate firms' expected behavior into their forecasts. I demonstrate that for firms with high tendencies and flexibilities to manage earnings downwards, and/or firms with negatively skewed earnings, analysts account for earnings management practices by lowering the otherwise optimal forecasts. Comparing analysts' consensus forecasts with proxy for non-strategic forecasts (otherwise optimal forecasts), I find that analysts' forecasts are systematically below the non-strategic forecasts for firm-quarters that have: high accounting reserves available to manage earnings downwards, high unmanaged earnings, low debt to equity ratios, negative forecasted earnings, and negatively skewed unmanaged earnings. These results suggest that analysts forecast below the non-strategic level in order to avoid the large optimistic forecast errors that occur when firms who cannot meet forecasts manage earnings downward. The test results also suggest that analysts forecast above the non-strategic forecasts when earnings are positively skewed, and/or when firms have high tendencies and flexibilities to manage earnings upwards.

Download or read book Why Do Managers Meet Or Slightly Beat Earnings Forecasts in Equilibrium written by Mei Feng and published by . This book was released on 2005 with total page 334 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Determinants of Earnings Forecast Error Earnings Forecast Revision and Earnings Forecast Accuracy written by Sebastian Gell and published by Springer Science & Business Media. This book was released on 2012-03-26 with total page 144 pages. Available in PDF, EPUB and Kindle. Book excerpt: ​Earnings forecasts are ubiquitous in today’s financial markets. They are essential indicators of future firm performance and a starting point for firm valuation. Extremely inaccurate and overoptimistic forecasts during the most recent financial crisis have raised serious doubts regarding the reliability of such forecasts. This thesis therefore investigates new determinants of forecast errors and accuracy. In addition, new determinants of forecast revisions are examined. More specifically, the thesis answers the following questions: 1) How do analyst incentives lead to forecast errors? 2) How do changes in analyst incentives lead to forecast revisions?, and 3) What factors drive differences in forecast accuracy?

Download or read book Management Earnings Forecasts Cash Flow Forecasts and Earnings Management written by Hanmei Chen and published by . This book was released on 2008 with total page 104 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Exploring Managers Accrual Related Forecast Bias written by Sami Keskek and published by . This book was released on 2017 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this study, we examine the effect of accrual-based earnings management on the association between managers' earnings forecast errors and accruals, which we label “managers' accrual-related forecast bias.” We build on extensive research which finds that managers engage in accrual-based earnings management to meet or beat earnings benchmarks and report smooth earnings series. We hypothesize that managers bias their subsequent-year forecasts in the direction of accruals management to increase market confidence in the managed earnings numbers. Consistent with our expectations, we find a positive association between managers' earnings forecast errors and discretionary accruals, but no association between managers' earnings forecast errors and nondiscretionary accruals. Furthermore, the association between managers' earnings forecast errors and discretionary accruals is stronger when managers have limited ability to continue managing subsequent-year accruals to support the bias in their forecasts. We also find a substantial decline in managers' accrual-related forecast bias following the enactment of the Sarbanes-Oxley Act of 2002 (SOX), which restricted managers' use of accrual-based earnings management. More importantly, we find that the effect of forecasting difficulty on managers' accrual-related forecast bias occurs only in the pre-SOX period. Overall, our results suggest that, contrary to claims in prior research, managers' accrual-related forecast bias is not simply a product of forecasting difficulty related to accruals. Rather, at least in some cases, it appears to be intentional.

Download or read book Risk Based Forecasting and Planning and Management Earnings Forecasts written by Christopher D. Ittner and published by . This book was released on 2017 with total page 67 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines the association between a firm's internal information environment and the accuracy of its externally-disclosed management earnings forecasts. Internally, firms use forecasts to plan for uncertain futures. The risk management literature argues that integrating risk-related information into forecasts and plans can improve a firm's ability to forecast future financial outcomes. We investigate whether this internal information manifests itself in the accuracy of external earnings guidance. Using detailed survey data and publicly-disclosed management earnings forecasts from a sample of publicly-traded U.S. companies, we find that more sophisticated risk-based forecasting and planning processes are associated with smaller earnings forecast errors and narrower forecast widths. These associations hold across a variety of different planning horizons (ranging from annual budgeting to long-term strategic planning), providing empirical support for the theoretical link between internal information quality and the quality of external disclosures.