We study the role of institutional environment in shaping firms' accounting choices as banking sector conditions worsen and their subsequent effect on the use of equity financing as an alternative source of financing (the “spare tire” effect). Using a sample of firms from five European...

This paper studies earnings management and forecast guidance activities of European banks between 2004 and 2008. Using 22,564 analyst forecasts for 55 banks we find that the proportion of banks hitting or beating analyst consensus fell from 68.22% pre-crisis to 28.13% during the crisis. Banks...