Earnings Management, Forecast Guidance and the Banking Crisis

The European Journal of Finance, Forthcoming

46 Pages Posted: 3 Nov 2011 Last revised: 18 Nov 2014

See all articles by Elena Beccalli

Elena Beccalli

Catholic University of the Sacred Heart of Milan - Institute of Economy and Finance

Saverio Bozzolan

LUISS Guido Carli University - Department of Business and Management

Andrea Menini

University of Padua

Philip Molyneux

University of Sharjah - College of Business Administration

Date Written: November 3, 2011

Abstract

This paper studies earnings management and forecast guidance activities of European banks between 2004 and 2008. Using 22,564 analyst forecasts for 55 banks we find that the proportion of banks hitting or beating analyst consensus fell from 68.22% pre-crisis to 28.13% during the crisis. Banks enjoy higher CARs when they hit analyst consensus only in the crisis. Earnings management is evident pre- but not during the crisis – it has no CAR effects. Forecast guidance increases the probability of hitting benchmark earnings and during the crisis yields higher CARs. Earnings management and forecast guidance act as complements in the crisis period.

JEL Classification: G21, M40, M41

Suggested Citation

Beccalli, Elena and Bozzolan, Saverio and Menini, Andrea and Molyneux, Philip, Earnings Management, Forecast Guidance and the Banking Crisis (November 3, 2011). The European Journal of Finance, Forthcoming . Available at SSRN: https://ssrn.com/abstract=1953843 or http://dx.doi.org/10.2139/ssrn.1953843

Elena Beccalli (Contact Author)

Catholic University of the Sacred Heart of Milan - Institute of Economy and Finance ( email )

Via Necchi 5
20123 Milano
Italy

Saverio Bozzolan

LUISS Guido Carli University - Department of Business and Management ( email )

Via Salvini, 3
Rome, 00198
Italy

Andrea Menini

University of Padua ( email )

Via 8 Febbraio 1848, 2
Padova, 35122
Italy

Philip Molyneux

University of Sharjah - College of Business Administration ( email )

University City Road
Sharjah, 27272
United Arab Emirates

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