We use a proprietary database of institutional investors' daily stock transactions to examine transient institutions' trading behavior in response to announcements of small negative earnings surprises (defined as quarterly earnings that fall short of analysts' consensus forecasts by one cent)....

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...

Financial analysts comprise one important group of information intermediaries between firms and investors (Healy & Palepu, 2001). They have great potential to decrease information asymmetry between firms and investors, resulting in better allocation of capital. Analysts' work is influenced by,...

Crowdsourcing — when a task normally performed by employees is outsourced to a large network of people via an open call — is making inroads into the investment research industry. We shed light on this new phenomenon by examining the value of crowdsourced earnings forecasts. Our sample...

We propose and validate a new measure of earnings quality based on a hidden Markov model. This measure, termed earnings fidelity, captures how faithful earnings signals are in revealing the true economic state of the firm. We estimate the measure using a Markov chain Monte Carlo procedure in a...

We investigate whether income smoothing affects the usefulness of earnings for contracting through the monitoring role of earnings-based debt covenants. First, we examine initial contract design and predict that income smoothing will increase (decrease) the use of earnings-based covenants if...

This paper examines the effect of income smoothing on information uncertainty, stock returns, and cost of equity. I show that income smoothing through both total accruals and discretionary accruals tends to reduce firms' information uncertainty, as measured by stock return volatility, analyst...

This paper analyses accounting accruals that may relate to earnings quality and its information content. The characteristics specifying earning quality are discussed according to research surveys of earnings quality. These are compared with the characteristics of accounting income specified by...

We investigate whether income smoothing affects the usefulness of earnings for contracting through the monitoring role of earnings-based debt covenants. First, we examine initial contract design and predict that income smoothing will increase (decrease) the use of earnings-based covenants if...