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Earnings expectations and employee safety

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  • Caskey, Judson
  • Ozel, N. Bugra

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.

Suggested Citation

  • Caskey, Judson & Ozel, N. Bugra, 2017. "Earnings expectations and employee safety," Journal of Accounting and Economics, Elsevier, vol. 63(1), pages 121-141.
    • Handle: RePEc:eee:jaecon:v:63:y:2017:i:1:p:121-141
    DOI: 10.1016/j.jacceco.2016.12.002
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    More about this item

    Keywords

    Earnings expectations; Real activities management; workplace safety;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy
    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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