We examine whether analysts include the managed earnings component in their forecasts or are surprised by the managed earnings component. We also investigate whether analysts' earnings forecasts for future periods and their stock recommendations are affected by earnings management in the current...

This paper unveils the rationality behind the widely criticized practice of consensus-beating, where companies try to report quarterly earnings equal to or slightly exceeding analysts expectations. In a simple theoretical model we show that a high-growth company can use active earnings guidance...

Prior research on meeting or beating earnings expectations focuses on managers' incentives to keep stock prices inflated by avoiding negative earnings surprises. However, in certain situations, managers may be motivated to depress stock prices in order to maximize their utility. We hypothesize...

This study examines whether differential interpretation of earnings announcements is affected by earnings and firm characteristics. We find that Kandel and Pearson's (1995) forecast measures of differential interpretation are: 1) negatively related to earnings predictability, firm size, and...

This paper asks two questions. First, has the prevalence of expectations management to meet/beat analyst expectations changed in the aftermath of the 2001-2002 accounting scandals and the passage of the 2002 Sarbanes-Oxley Act (SOX)? Second, has the mix among the three mechanisms used for...

I examine whether managers use discretion in the two accounts related to revenue recognition, accounts receivable and deferred revenue, to avoid three common earnings benchmarks. I find that managers use discretion in both accounts to avoid negative earnings surprises. I find that neither of...

The paper studies the manner by which earnings expectations are met, measures the rewards to meeting or beating earnings expectations (MBE) formed just prior to the release of quarterly earnings, and tests alternative explanations for this reward. The evidence supports the claims that the MBE...

This paper finds that firms that meet or beat current analysts' earnings expectations (MBE) enjoy a higher return over the quarter than firms with similar quarterly earnings forecast errors that fail to meet these expectations. Further, such a premium to MBE, although somewhat smaller, exists in...

This paper examines whether analysts resident in a country make more precise earnings forecasts for firms in that country than analysts who are not resident in that country. Using a sample of 32 countries, we find that there is an economically and statistically significant analyst local...

Recent studies in the accounting literature provide evidence of an equity price premium whenever firms meet or exceed analysts' earnings forecasts. That is, the market perceives the act of meeting earnings forecasts as a signal about future firm performance. Financial analysts typically issue...