The Impact of Regulation on Firms’ Ability to Habitually Meet or Beat Analysts’ Expectations

Posted: 6 Jul 2011

See all articles by Jan L. Williams

Jan L. Williams

University of Baltimore

Huey-Lian Sun

Morgan State University - Department of Accounting and Finance

Date Written: May 23, 2011

Abstract

Firms are pressured to meet or beat analysts’ expectations (MBE) to avoid being penalized by the market. Some firms sporadically MBE while other firms are able to consistently, or habitually, MBE. This study is an exploratory attempt to investigate how habitual MBE firms are different from firms that sporadically MBE, and whether Regulation FD and the Sarbanes-Oxley Act have affected firms’ ability to habitually MBE in the post regulation periods. We find that habitual MBE firms are different than sporadic MBE firms, and that they use strategies less to MBE than sporadic MBE firms. Furthermore, it has become more difficult for firms to habitually MBE in the post-Regulation periods.

Keywords: Earnings Management, Expectations Management, Regulation FD, Sarbanes-Oxley Act, Analysts’ Expectations

JEL Classification: G10, M41

Suggested Citation

Williams, Jan L. and Sun, Huey-Lian, The Impact of Regulation on Firms’ Ability to Habitually Meet or Beat Analysts’ Expectations (May 23, 2011). Research in Accounting Regulations, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1878745

Jan L. Williams (Contact Author)

University of Baltimore ( email )

Merrick School of Business
1420 N. Charles Street
Baltimore, MD 21201
United States
410.837.6593 (Phone)
410.837.5722 (Fax)

Huey-Lian Sun

Morgan State University - Department of Accounting and Finance ( email )

Baltimore, MD 21251
United States
443-885-3971 (Phone)
410-319-3721 (Fax)

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