Management of Earnings and Analysts' Forecasts to Achieve Zero and Small Positive Earnings Surprises
20 Pages Posted: 13 Aug 2006
Abstract
This paper corroborates the finding of prior studies that managers avoid reporting earnings lower than analyst forecasts (i.e., negative earnings surprises) and provides new evidence of actions contributing to this phenomenon. Specifically, we provide empirical evidence of both (1) upward management of reported earnings and (2) downward management of analysts' forecasts to achieve zero and small positive earnings surprises. Further analysis of the components of earnings management suggests that both the operating cash flow and discretionary accruals components of earnings are managed.
JEL Classification: M41, M43, G29
Suggested Citation: Suggested Citation
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Management of Earnings and Analysts' Forecasts to Achieve Zero and Small Positive Earnings Surprises
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