This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Does Analyst Following Curb Earnings Management?

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
DEGEORGE, François () (University of Lugano)
DING, Yuan
JEANJEAN, Thomas
STOLOWY, Hervé

Additional information is available for the following registered author(s):

Abstract

We investigate the role of analyst following as a monitoring device reducing earnings management. We find strong evidence that analysts are more effective monitors in transparent environments than in opaque environments. In a sample of 51,401 observations for 10,866 non-financial firms in 26 countries from 1994 to 2002, we find that the more transparent the country, the stronger the reduction in earnings management activity associated with analyst following. We also find that firms in transparent countries use short-term earnings management techniques to reach the consensus analyst forecast. Taken together, our findings suggest that while analyst following acts as a curb on the most visible forms of earnings management in transparent countries, it also encourages more subtle, short-term forms of earnings management to reach the analyst consensus. In transparent countries monitoring effectiveness more than offsets consensus fixation. In opaque countries, analyst following does not act as a curb on total earnings management, but neither does it create any short-term pressure to manage earnings. Our results are robust to (1) our measure of transparency, (2) reverse causality checks and (3) our choice of measure of earnings management.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.hec.fr/var/fre/storage/original/application/3eac4aa81346f362c9b786c3b3c81e43.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by HEC Paris in its series Les Cahiers de Recherche with number 810.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 47 pages
Date of creation: 11 Mar 2005
Date of revision:
Handle: RePEc:ebg:heccah:0810

Contact details of provider:
Postal: HEC Paris, 78351 Jouy-en-Josas cedex, France
Web page: http://www.hec.fr/
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Sandra Dupouy).

Related research
Keywords: analyst following; earnings management; international comparison;

Find related papers by JEL classification:
G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Investment Policy

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Rafael LaPorta & Florencio Lopez de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. "Legal Determinants of External Finance," Harvard Institute of Economic Research Working Papers 1788, Harvard - Institute of Economic Research.
    Other versions:
  2. DeFond, Mark L. & Subramanyam, K. R., 1998. "Auditor changes and discretionary accruals," Journal of Accounting and Economics, Elsevier, vol. 25(1), pages 35-67, February. [Downloadable!] (restricted)
  3. Leuz, Christian & Nanda, Dhananjay & Wysocki, Peter D., 2003. "Earnings management and investor protection: an international comparison," Journal of Financial Economics, Elsevier, vol. 69(3), pages 505-527, September. [Downloadable!] (restricted)
  4. John R. Graham & Campbell R. Harvey & Shiva Rajgopal, 2004. "The Economic Implications of Corporate Financial Reporting," NBER Working Papers 10550, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October. [Downloadable!] (restricted)
  6. DeFond, Mark L. & Jiambalvo, James, 1994. "Debt covenant violation and manipulation of accruals," Journal of Accounting and Economics, Elsevier, vol. 17(1-2), pages 145-176, January. [Downloadable!] (restricted)
  7. Thorsten Beck & Ross Levine, 2002. "Industry Growth and Capital Allocation: Does Having a Market- or Bank-Based System Matter?," NBER Working Papers 8982, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  8. Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer, 2003. "What Works in Securities Law?," NBER Working Papers 9882, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  9. Brown, Lawrence D. & Ngo Higgins, Huong, 2001. "Managing earnings surprises in the US versus 12 other countries," Journal of Accounting and Public Policy, Elsevier, vol. 20(4-5), pages 373-398. [Downloadable!] (restricted)
  10. Alexander Dyck & Luigi Zingales, 2004. "Private Benefits of Control: An International Comparison," Journal of Finance, American Finance Association, vol. 59(2), pages 537-600, 04. [Downloadable!] (restricted)
    Other versions:
  11. Subramanyam, K. R., 1996. "The pricing of discretionary accruals," Journal of Accounting and Economics, Elsevier, vol. 22(1-3), pages 249-281, October. [Downloadable!] (restricted)
  12. McNichols, Maureen F., 2000. "Research design issues in earnings management studies," Journal of Accounting and Public Policy, Elsevier, vol. 19(4-5), pages 313-345. [Downloadable!] (restricted)
  13. Fields, Thomas D. & Lys, Thomas Z. & Vincent, Linda, 2001. "Empirical research on accounting choice," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 255-307, September. [Downloadable!] (restricted)
  14. Kothari, S.P. & Leone, Andrew J. & Wasley, Charles E., 2005. "Performance matched discretionary accrual measures," Journal of Accounting and Economics, Elsevier, vol. 39(1), pages 163-197, February. [Downloadable!] (restricted)
  15. Healy, Paul M., 1985. "The effect of bonus schemes on accounting decisions," Journal of Accounting and Economics, Elsevier, vol. 7(1-3), pages 85-107, April. [Downloadable!] (restricted)
  16. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December. [Downloadable!] (restricted)
    Other versions:
  17. Degeorge, Francois & Patel, Jayendu & Zeckhauser, Richard, 1999. "Earnings Management to Exceed Thresholds," Journal of Business, University of Chicago Press, vol. 72(1), pages 1-33, January. [Downloadable!] (restricted)
    Other versions:
  18. Michael C. Jensen, 2005. "Agency Costs of Overvalued Equity," Financial Management, Financial Management Association, vol. 34(1), Spring.
  19. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 2000. "Investor protection and corporate governance," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 3-27. [Downloadable!] (restricted)
    Other versions:
Full references

Statistics
Access and download statistics

Did you know? All RePEc services are meant to be be free forever, as they are all run by volunteers.

This page was last updated on 2009-12-15.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.