Earnings Expectations and Employee Safety

Posted: 27 Dec 2016 Last revised: 13 Jan 2017

See all articles by Judson Caskey

Judson Caskey

University of California, Los Angeles (UCLA) - Accounting Area

N. Bugra Ozel

University of Texas at Dallas

Date Written: December 5, 2016

Abstract

We examine the relation between workplace safety and managers’ attempts to meet earnings expectations. Using establishment-level data on workplace safety from the Occupational Safety and Health Administration, we document significantly higher injury/illness rates in firms that meet or just beat analyst forecasts compared to firms that miss or comfortably beat analyst forecasts. The higher injury/illness rates in firms that meet or just beat analyst forecasts are associated with both increases in employee workloads and in abnormal reductions of discretionary expenses. The relation between benchmark beating and workplace safety is stronger when there is less union presence, when workers’ compensation premiums are less sensitive to injury claims, and among firms with less government business. Our findings highlight a specific consequence of managers’ attempts to meet earnings expectations through real activities management.

Keywords: Earnings Expectations; Real Activities Management; Workplace Safety

JEL Classification: G10; J28; K32; M41

Suggested Citation

Caskey, Judson and Ozel, N. Bugra, Earnings Expectations and Employee Safety (December 5, 2016). Journal of Accounting & Economics (JAE), Vol. 63, No. 1, 2017. Available at SSRN: https://ssrn.com/abstract=2884725

Judson Caskey (Contact Author)

University of California, Los Angeles (UCLA) - Accounting Area ( email )

D410 Anderson Complex
Los Angeles, CA 90095-1481
United States

HOME PAGE: http://sites.google.com/site/judsoncaskey/

N. Bugra Ozel

University of Texas at Dallas ( email )

800 W Campbell Rd SM41
Richardson, TX 75201
United States

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