Earnings Management: The Effect of Ex Ante Earnings Expectations

Posted: 24 Apr 2001  

Jeff L. Payne

University of Kentucky - Von Allmen School of Accountancy

Sean W.G. Robb

University of Toronto - Rotman School of Management

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Abstract

SEC Chairman Arthur Levitt has recently expressed concerns about the use of earnings management to meet Wall Street earnings expectations set by analysts' forecasts. We investigate whether managers aim to "meet or beat" analysts' forecasts and examine the influence of analysts' forecast dispersion on this aim. Our results are consistent with managers aligning earnings with market expectations established by analysts' forecasts. Additionally, our evidence is consistent with managers behaving as though they have greater incentives to increase income in settings where the dispersion in analysts' forecasts is low.

Keywords: Earnings management; Analysts; Forecasts; Discretionary accruals

JEL Classification: M41, M43, G29

Suggested Citation

Payne, Jeff L. and Robb, Sean W.G., Earnings Management: The Effect of Ex Ante Earnings Expectations. Journal of Accounting, Auditing and Finance, Vol. 15, Fall 2000. Available at SSRN: https://ssrn.com/abstract=257687

Jeff L. Payne (Contact Author)

University of Kentucky - Von Allmen School of Accountancy ( email )

Lexington, KY 40506
United States

Sean W.G. Robb

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6
Canada
416-946-5650 (Phone)
416-971-3048 (Fax)

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