We investigate whether investors are misled by firms that exclude particular expenses in calculating non-GAAP earnings in order to beat analysts' earnings forecasts. Our empirical analyses suggest that firms that pursue a strategy of non-GAAP reporting to beat analysts' earnings forecasts not...

This paper examines the role of earnings quality in the future performance of firms that marginally miss or beat analysts' forecasts. We focus primarily on two groups of firms: those that miss their forecast but appear not to have attempted to exceed it by managing earnings, and those that...

This paper examines the performance consequences of cutting discretionary expenditures and managing accruals to exceed analyst forecasts. We show that firms that just beat analyst forecasts with low quality earnings exhibit a short-term stock price benefit relative to firms that miss forecasts...

We study how securities analysts influence managers' use of different types of earnings management. To isolate causality, we employ a quasi-experiment that exploits exogenous reductions in analyst following resulting from brokerage house mergers. We find that managers respond to the coverage...

This paper investigates whether analyst site visits, where sell-side analysts visit corporate sites and interact with management, reduces earnings management by host firms. Taking advantage of the disclosure of analyst site visits by Chinese listed firms, we find that the intensity of analyst...

We examine the performance of acquirers who hire an advisor that employs a “star” analyst covering the target (i.e., “star-crossed” deals) and show that such deals have lower abnormal announcement returns (2.1%), lower total acquisition returns (8.9%), and greater subsequent goodwill...

Using data from the Chinese A-share market in 2004-2012, this paper shows how cognitive bias of individual analysts lead to counter-productive effect in less-developed financial markets. We form an ex-ante measure of analysts' expectation error, a measure suitable for markets with short history....

We examine whether analyst independence contributes to analysts’ monitoring role in deterring accruals earnings management. We first report a negative association between earnings management and the ratio of independent analysts to brokerage analysts covering a firm. Next, through the lens of...

Survey evidence shows CFOs to believe that earnings management can enhance investor valuation of their firms. This evidence raises the question of correspondence between the beliefs of CFOs and investors. Surveying financial analysts to gain insight into how earnings management influences...