In this paper we explore the role of accruals in determining “earnings quality” from both a stewardship and a valuation perspective. We show that the valuation and stewardship qualities of accrual accounting are maximized by either an “aggressive” or a “conservative” accrual...

Over the past 12 years, financial analysts across the world have been optimistically wrong with their 12-month earnings forecasts by 25.3%. This study may be the first of its kind to assess analyst earnings forecast accuracy at all listed companies across the globe, covering 70 countries. A...

We estimate the effect of information and ability spillovers on sell-side analysts' quarterly EPS forecast accuracy. Using a model that relates mean peer group ability along with the analyst's own ability to the analyst's forecast accuracy, we find that spillovers from peer analysts are large,...

This is the first study to examine the post-earnings-announcement drift anomaly in a Real Estate Investment Trust (REIT) context. The efficient markets hypothesis suggests that unexpected earnings should be fully incorporated into asset prices soon after being publicly announced. We hypothesize...

This paper examines how the characteristics of accounting systems and management incentives interact and collectively determine financial reporting quality. We develop a rational expectations equilibrium model that features a steady-state firm with investments, financial and non-financial...

This study examines the role of expectations management in explaining why firms with high dispersion in analyst forecasts experience relatively low future stock returns. We first demonstrate that the negative relation between dispersion and returns is concentrated around earnings announcements...

This study presents evidence suggesting that investors do not fully unravel predictable pessimism in sell-side analysts' earnings forecasts. We show that measures of prior consensus and individual analyst forecast pessimism are predictive of both the sign of firms' earnings surprises and the...

Motivated by research in psychology and experimental economics, we assume that investors update their beliefs about an asset's value upon observing the price, but only when the price clearly reveals that others obtained private information that differs from their own private information. In...

This study proposes and tests an alternative to the extant earnings management explanation for zero and small positive earnings surprises (i.e., analyst forecast errors). We argue that analysts' ability to strategically induce slight pessimism in earnings forecasts varies with the precision of...

We examine how supplier-firm shareholders respond to the earnings announcements of their major customers to test the moderated confidence hypothesis, which predicts overreaction to imprecise signals. In our setting, the moderated confidence hypothesis predicts that supplier shareholders will...