Managing Earnings Surprises in the U.S. Versus 12 Other Countries

26 Pages Posted: 27 Jan 2000 Last revised: 1 Apr 2014

See all articles by Lawrence D. Brown

Lawrence D. Brown

Temple University - Department of Accounting

Huong N. Higgins

Worcester Polytechnic Institute - School of Business

Abstract

This paper examines whether managers in the U.S. manage earnings, profits and losses surprises to a greater extent than do managers in 12 other countries. We expect managers in the U.S. to be more likely to manage earnings, profits and losses surprises than do managers in other countries since U.S. managers have greater incentives to monitor current price performance. These incentives include greater equity ownership by top executives, more monitoring by institutional and large shareholders, a larger number of outside directors on their board of directors, a greater threat of external takeovers, and a more litigious environment. Consistent with our expectations, we find that managers in the U.S. manage earnings surprises relatively more than do managers in 12 other countries. More specifically, U.S. managers are more likely to manage profits surprises than do managers in all 12 other countries examined, and they are more likely to manage losses surprises than do managers in all other countries except Japan, the only country requiring managers to forecast earnings. We also expect U.S. managers to be more likely to manage analysts' estimates, given their extensive public relations departments and their greater incentives to manage earnings surprises. Our evidence bears out our contention.

JEL Classification: M41, M43, K22, G32, G34

Suggested Citation

Brown, Lawrence D. and Higgins, Huong N., Managing Earnings Surprises in the U.S. Versus 12 Other Countries. Journal of Accounting and Public Policy, Vol. 20, No. 4-5, 2001. Available at SSRN: https://ssrn.com/abstract=202132 or http://dx.doi.org/10.2139/ssrn.202132

Lawrence D. Brown (Contact Author)

Temple University - Department of Accounting ( email )

Philadelphia, PA 19122
United States

Huong N. Higgins

Worcester Polytechnic Institute - School of Business ( email )

100 Institute Road
Worcester, MA 01609
United States
508-831-5626 (Phone)
508-831-5720 (Fax)

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