Abstract

http://ssrn.com/abstract=831868
 
 

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Stock Repurchases as an Earnings Management Device


Paul Hribar


University of Iowa - Henry B. Tippie College of Business

Nicole Thorne Jenkins


University of Kentucky - Von Allmen School of Accountancy, Gatton College of Business and Economics

W. Bruce Johnson


University of Iowa - Department of Accounting


Journal of Accounting and Economics, Forthcoming

Abstract:     
We investigate whether firms use stock repurchases to meet or beat analysts' EPS forecasts. We identify conditions under which repurchases increase EPS and document the frequency of accretive repurchases from 1988 to 2001. We find a disproportionately large number accretive stock repurchases among firms that would have missed analysts' forecasts without the repurchase. The repurchase-induced component of earnings surprises appears to be discounted by the market, and this discount is larger when the repurchase seems motivated by EPS management, although using the repurchase to avoid missing analyst forecasts appears to mitigate some of the negative stock price response.

Keywords: Stock repurchases, earnings management

JEL Classification: G34, M43

Accepted Paper Series


Not Available For Download

Date posted: November 7, 2005  

Suggested Citation

Hribar, Paul and Jenkins, Nicole Thorne and Johnson, W. Bruce, Stock Repurchases as an Earnings Management Device. Journal of Accounting and Economics, Forthcoming. Available at SSRN: http://ssrn.com/abstract=831868

Contact Information

Paul Hribar (Contact Author)
University of Iowa - Henry B. Tippie College of Business ( email )
Dept. of Accounting
Iowa City, IA 52242-1000
United States
319-335-1008 (Phone)
Nicole Thorne Jenkins
University of Kentucky - Von Allmen School of Accountancy, Gatton College of Business and Economics ( email )
Lexington, KY 40506
United States
W. Bruce Johnson
University of Iowa - Department of Accounting ( email )
108 Pappajohn Business Building
Iowa City, IA 52242-1000
United States
319-335-1048 (Phone)
319-335-1956 (Fax)
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