Financial analysts' forecast revisions and managers' reporting behavior
This paper studies an analyst's forecasting strategy and a manager's earnings management policy. When reporting earnings, the manager trades off the disutility he obtains from falling short of the analyst's forecast against the costs of manipulating earnings. The model predicts that: (i) the analyst's forecast exceeds median reported earnings; (ii) the analyst is more likely to revise his forecast downward than upward; (iii) mean and median forecast errors are larger in magnitude when the analyst has less precise information; and (iv) the stock market is, on average, more sensitive to reported earnings than to the analyst's forecasts.
If you experience problems downloading a file, check if you have the proper application to view it first. 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
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.:
- repec:bla:joares:v:30:y:1992:i:2:p:185-209 is not listed on IDEAS
- Lin, Hsiou-wei & McNichols, Maureen F., 1998. "Underwriting relationships, analysts' earnings forecasts and investment recommendations," Journal of Accounting and Economics, Elsevier, vol. 25(1), pages 101-127, February.
- Terence Lim, 2001. "Rationality and Analysts' Forecast Bias," Journal of Finance, American Finance Association, vol. 56(1), pages 369-385, 02.
- Paul E. Fischer & Phillip C. Stocken, 2004. "Effect of Investor Speculation on Earnings Management," Journal of Accounting Research, Wiley Blackwell, vol. 42(5), pages 843-870, December.
- Kothari, S. P., 2001. "Capital markets research in accounting," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 105-231, September.
- Bartov, Eli & Givoly, Dan & Hayn, Carla, 2002. "The rewards to meeting or beating earnings expectations," Journal of Accounting and Economics, Elsevier, vol. 33(2), pages 173-204, June.
- Andrew R. Jackson, 2005. "Trade Generation, Reputation, and Sell-Side Analysts," Journal of Finance, American Finance Association, vol. 60(2), pages 673-717, 04.
- Michaely, Roni & Womack, Kent L, 1999. "Conflict of Interest and the Credibility of Underwriter Analyst Recommendations," Review of Financial Studies, Society for Financial Studies, vol. 12(4), pages 653-686.
- Abarbanell, Jeffery S., 1991. "Do analysts' earnings forecasts incorporate information in prior stock price changes?," Journal of Accounting and Economics, Elsevier, vol. 14(2), pages 147-165, June.
- Cowen, Amanda & Groysberg, Boris & Healy, Paul, 2006. "Which types of analyst firms are more optimistic?," Journal of Accounting and Economics, Elsevier, vol. 41(1-2), pages 119-146, April.
- repec:bla:joares:v:35:y:1997:i::p:167-199 is not listed on IDEAS
- repec:bla:joares:v:28:y:1990:i:2:p:409-417 is not listed on IDEAS
- Lucy F. Ackert & George Athanassakos, 1997.
"Prior Uncertainty, Analyst Bias, And Subsequent Abnormal Returns,"
Journal of Financial Research,
Southern Finance Association;Southwestern Finance Association, vol. 20(2), pages 263-273, 06.
- Ackert, Lucy F & Athanassakos, George, 1997. "Prior Uncertainty, Analyst Bias, and Subsequent Abnormal Returns," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 20(2), pages 263-273, Summer.
- Harrison Hong & Jeffrey D. Kubik, 2003. "Analyzing the Analysts: Career Concerns and Biased Earnings Forecasts," Journal of Finance, American Finance Association, vol. 58(1), pages 313-351, 02.
- Ron Kasznik, 2002. "Does Meeting Earnings Expectations Matter? Evidence from Analyst Forecast Revisions and Share Prices," Journal of Accounting Research, Wiley Blackwell, vol. 40(3), pages 727-759, 06.
- repec:bla:joares:v:36:y:1998:i:2:p:299-320 is not listed on IDEAS
- Stickel, Scott E, 1992. " Reputation and Performance among Security Analysts," Journal of Finance, American Finance Association, vol. 47(5), pages 1811-1836, December.
- Burgstahler, David & Dichev, Ilia, 1997. "Earnings management to avoid earnings decreases and losses," Journal of Accounting and Economics, Elsevier, vol. 24(1), pages 99-126, December. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:eee:jaecon:v:46:y:2008:i:2-3:p:334-348. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.