Analysts’ Forecasts as an Incentive for Earnings Management

27 Pages Posted: 5 Feb 2015

See all articles by Susana Callao

Susana Callao

University of Zaragoza

José Ignacio Jarne

University of Zaragoza - Faculty of Business and Economics

Date Written: February 5, 2015

Abstract

The aim of our study is to determine, within the area of Listed Spanish companies, whether analyst forecasts constitute an incentive to manage earnings (upwards to achieve them or downwards to avoid exceeding them) and whether this incentive acquires the same or different importance for the management of companies at different times.

Using the approach of discretionary accruals to measure manipulation, the results show that earnings forecasted by analysts constitute an incentive to manage earnings and that this incentive is greater as the publication of earnings approaches. However, we do not find evidence of an incentive to manage earnings downwards in order not to exceed analyst forecasts, thereby avoiding subsequent forecasts that might be difficult to achieve.

Keywords: earnings management, analysts’ forecasts, earnings management incentives, discretionary accruals, listed Spanish companies

JEL Classification: M41

Suggested Citation

Callao, Susana and Jarne, José Ignacio, Analysts’ Forecasts as an Incentive for Earnings Management (February 5, 2015). Available at SSRN: https://ssrn.com/abstract=2560737 or http://dx.doi.org/10.2139/ssrn.2560737

Susana Callao (Contact Author)

University of Zaragoza ( email )

Zaragoza, 50005
Spain

José Ignacio Jarne

University of Zaragoza - Faculty of Business and Economics ( email )

Gran Via, 2
50005 Zaragoza, Zaragoza 50005
Spain

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