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 Earnings Management or Forecast Guidance to Meet Analyst Expectations written by Vasiliki E. Athanasakou and published by . This book was released on 2009 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine whether UK firms engage in earnings management or forecast guidance to ensure that their reported earnings meet analyst earnings expectations. We explore two earnings management mechanisms: a) positive abnormal working capital accruals and b) classification shifting of core expenses to non-recurring items. We find no evidence of a positive association between income-increasing abnormal working capital accruals and the probability of meeting analyst forecasts. Instead we find evidence consistent with a subset of larger firms shifting small core expenses to other non-recurring items to just hit analyst expectations with core earnings. We also find that the probability of meeting analyst expectations increases with downward guided forecasts. Overall our results suggest that UK firms are more likely to engage in earnings forecast guidance or, for a subset of larger firms, in classification shifting rather than in accruals management to avoid negative earnings surprises.
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 Real Earnings Management and the Properties of Analysts Forecasts written by Lisa Eiler and published by . This book was released on 2016 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine how analysts' earnings forecast properties vary when accounting information is more difficult to process. Specifically, we investigate whether analysts' forecast properties are associated with traditional real earnings management (REM) measures. We hypothesize and find that analysts' forecast errors and dispersion are greater for REM firms. Next, we investigate cross-sectional differences among REM firms based on the presence of management guidance. We find some evidence that management guidance reduces the association between REM and analysts' forecast error, and strong evidence that management guidance reduces the association between REM and dispersion. Finally, we investigate cross-sectional differences among REM firms based on their earnings management incentives. We find that firms with low earnings management incentives drive the association between REM and analysts' forecast error and dispersion. This result suggests earnings are most difficult to forecast for REM firms lacking obvious financial reporting objectives. Our results are consistent across numerous proxies for REM. To the best of our knowledge, our paper is the first to provide robust evidence of a relation between REM and the properties of analysts' forecasts.
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 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 Short Term Earnings Guidance and Earnings Management written by Andrew C. Call and published by . This book was released on 2011 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the relation between short-term earnings guidance and earnings management. We find that firms issuing short-term earnings forecasts exhibit significantly lower absolute abnormal accruals, our proxy for earnings management, than do firms that do not issue earnings forecasts. Regular guiders also exhibit less earnings management than do less regular guiders. These findings are contrary to conventional wisdom but consistent with the implications of Dutta and Gigler (2002) and the expectations alignment role of earnings guidance (Ajinkya and Gift 1984). Our results continue to hold after we control for self-selection and potential reverse causality concerns, and in a setting where managers are documented to have strong incentives to manage earnings. Additional analysis reveals that guiding firms exhibit less income-increasing accrual management whether firms guide expectations upwards or downwards, and no evidence that guiding firms inflate earnings through real activities management. We also provide evidence to demonstrate that meeting-or-beating benchmarks is not an appropriate proxy for earnings management in our research setting.
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 Mechanisms to Meet Beat Analyst Earnings Expectations in the Pre and Post Sarbanes Oxley Eras written by Eli Bartov and published by . This book was released on 2008 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper asks two questions. First, has the prevalence of expectations management tomeet/beat analyst expectations changed in the aftermath of the 2001-2002 accountingscandals and the passage of the 2002 Sarbanes-Oxley Act (SOX)? Second, has the mixamong the three mechanisms used for meeting earnings targets: accrual earningsmanagement, real earnings management, and earnings expectations management shiftedin the Post-SOX Period? We document that the propensity to meet/beat analystexpectations has declined significantly in the Post-SOX Period. Our primary findingsexplain this pattern. In particular, we find a decline in the use of expectationsmanagement and accrual management, and no change in real earnings management in thePost-SOX Period relative to the preceding seven-year period. Our results are robust tocontrolling for varying macro economic conditions. These findings contribute to theacademic literature, investors, and regulators.
Download or read book Whisper Forecasts and Earnings Management written by Arnoldo Jose Rodriguez and published by . This book was released on 2005 with total page 114 pages. Available in PDF, EPUB and Kindle. Book excerpt:
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 Earnings Management Or Forecast Guidance to Meet Analyst Expectations written by Vasiliki Athanasakou and published by . This book was released on 2006 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Management s Incentives to Guide Analysts Forecasts written by Dawn A. Matsumoto and published by . This book was released on 1999 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent reports in the popular press allege that managers guide analysts' forecasts downward to improve their chances of meeting or beating these forecasts when earnings are announced. Since the majority of this alleged guidance is unobservable, I use systematic patterns in analysts' forecast errors as a proxy for firm-provided guidance and examine both the change in guidance over time as well as the characteristics of firms exhibiting evidence of this guidance. The evidence is consistent with an increase in firm-provided guidance in recent years and differences across firms in the propensity to guide forecasts downward. In particular, I find: 1) an increasing number of forecast errors exactly equal to zero particularly for firms with initially high forecasts; 2) when firms miss analysts' expectations at the earnings announcement, the proportion that miss quot;highquot; (positive earnings surprise) versus miss quot;lowquot; (negative earnings surprise) has increased in recent years particularly for firms with initially high forecasts; 3) firms with higher growth prospects, higher institutional ownership, and higher litigation risk are more likely to guide analysts' forecasts downward to ensure reported earnings meet expectations at the earnings announcement, while firms with low value relevance of earnings are less likely to do so; and 4) firms with high institutional ownership and reliance on implicit claims with their stakeholders tend to exceed rather than fall short of expectations at the earnings announcement.
Download or read book Real Earnings Management Habitually Meeting closely Beating Analysts Forecasts and Firms Long term Economic Performance written by Fanghong Jiao and published by . This book was released on 2014 with total page 117 pages. Available in PDF, EPUB and Kindle. Book excerpt: Real earnings management (REM) has gained more attention due to its more extensive application than that before the enactment of Sarbanes-Oxley Act (SOX). Analysts' earnings forecast is an important benchmark for both the investors and the managers. Gunny (2010) finds that the signaling of future prospects overcomes the possibility of opportunism in firms that occasionally use REM to meet/closely beat benchmarks. However, the effect of repeatedly using REM to meet/beat earnings benchmarks has not been explored. This paper examines the long-term economic performance (Tobin's Q) of firms that utilize REM to habitually meet/closely beat analysts' earnings forecasts (HabitMBE). The results suggest that in equilibrium, while HabitMBE firms in general enjoy a market premium, HabitMBE firms that use REM repeatedly are penalized by investors, and the market premium disappears. Not surprisingly, I find that HabitMBE firms that have already used REM repeatedly try to curtail its use - a finding that is not found for occasional REM meeting/close beating firms. Another interesting finding of this study is that analysts' downward forecast revision in the long-run has a significantly negative effect on firms' economic performance, which prior studies have not clearly documented.
Download or read book Earnings Management Alternative Explanations for Observed Discontinuities in the Frequency Distribution of Earnings Earnings Changes and Analyst Forecast Errors written by Cindy Durtschi and published by . This book was released on 2005 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: The discontinuities at zero in the frequency distributions of reported net income (deflated by beginning-of-period market capitalization), deflated change in net income, I/B/E/S quot;actualquot; earnings, and analysts' forecast errors are the most widely cited evidence of earnings management. We provide evidence consistent with alternative explanations for each of these discontinuities. We show that firms reporting small losses are priced significantly differently from firms that report small profits. An effect of this difference in pricing is that earnings to the left of zero are deflated by significantly different denominators than earnings to the right of zero inducing a discontinuity in the distributions of deflated net income and deflated changes in net income at zero. We also show that sample selection criteria may contribute to the discontinuity in these distributions as well as the discontinuity in I/B/E/S actual earnings. Finally, the presumption in the literature which focuses on the discontinuity at zero in the distribution of analysts' forecasts errors is that earnings are managed to meet or beat analysts' forecasts. We provide an alternative explanation: the discontinuity is caused by the fact that analysts' forecast errors tend to be much greater when the forecasts are optimistic than when they are pessimistic. This tendency leads to more small positive forecasts errors (pessimistic forecasts) than small negative forecast errors (optimistic forecasts).
Download or read book A Study of Meeting Or Beating Analysts Forecasts of Earning and Timeliness of Write offs written by Tae Hee Choi and published by . This book was released on 2002 with total page 334 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: Empirical evidence supports the notion that both reported earnings and analysts' forecasts of earnings are managed in response to a variety of incentives of managers. One of the important incentives to manage earnings and/or analysts' forecasts is to exceed the market's expectation. The purpose of this study is to explore issues associated with earnings management and/or forecast management. In this thesis, I will present two essays to investigate issues pertaining to earnings management and/or forecast management.
Download or read book Classificatory Earnings Management and Meeting Or Beating Analysts Earnings Forecasts written by Shu Lin and published by . This book was released on 2006 with total page 302 pages. Available in PDF, EPUB and Kindle. Book excerpt:
