Valuation theory, investment managers, financial analysts, and textbooks advocating horizontal financial statement analysis suggest that the change in earnings growth (earnings acceleration) conveys value relevant information. We test this assertion using a large sample of U.S. firms. Results...

This paper examines the link between managers' equity incentives - arising from stock-based compensation and stock ownership - and earnings management. We hypothesize that managers with high equity incentives are more likely to sell shares in the future and this motivates these managers to...

We examine stock sales as a managerial incentive to help explain the discontinuity around the analyst forecast benchmark. We find that the likelihood of just meeting versus just missing the analyst forecast is strongly associated with subsequent managerial stock sales. Moreover, we provide...

The extensive literature that investigates whether analysts' earnings forecasts are biased and/or inefficient has produced a history of conflicting evidence and no definitive answers to either question. This paper shows how two relatively small but statistically influential asymmetries in the...

In this paper we present evidence that a firm's stock price sensitivity to earnings news, as measured by outstanding stock recommendation, affects its incentives to manage earnings and, in turn, affects analysts' ex post forecast errors. In particular, we find a tendency for firms rated a Sell...

This paper investigates whether firms manage analyst forecasts to generate positive earnings surprises and the consequences of such forecast management. We first document that firms quot;talk downquot; forecasts. Forecasts of quarterly earnings issued later in the forecasting horizon grow...

Previous studies document that publicly traded firms report more small increases in earnings than small decreases in earnings and long strings of consecutive earnings increases. Although the two earnings properties have been partially attributed to earnings management, there is little consensus...

Prior research has documented the empirical regularity that more firms than expected (i) report small positive earnings and (ii) have zero forecast errors. It appears that management avoid reporting negative earnings or disappointing analysts. We investigate how and why firms beat these...

This paper reassesses evidence of anticipatory income smoothing reported in DeFond and Park (1997) in light of knowledge about the shortcomings in the model used to identify the managed component of reported earnings. Our tests demonstrate that the empirical results reported in DeFond and Park...