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The Incidence Of Expectations Management In The Post-Regulation Fair Disclosure Period

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  • Sherry Fang Li

Abstract

This paper investigates the incidence of expectations management in the post-Regulation Fair Disclosure period. Using uniquely hand-collected data, I present direct evidence that the expectations management game is still played in the new regulatory environment. Management has switched to issuing pessimistic public guidance (instead of relying on private communications as in the pre-Regulation Fair Disclosure period) to dampen analysts’ expectations to a beatable level. In addition, they use both quantitative and qualitative, both earnings-related and nonearnings-related disclosures to influence analysts’ forecasts. However, I find that expectations management is decreasing during my sample period (2001-2004).

Suggested Citation

  • Sherry Fang Li, 2023. "The Incidence Of Expectations Management In The Post-Regulation Fair Disclosure Period," Accounting & Taxation, The Institute for Business and Finance Research, vol. 15(1), pages 105-116.
    • Handle: RePEc:ibf:acttax:v:15:y:2023:i:1:p105-116:
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    References listed on IDEAS

    as
    1. Skinner, Dj, 1994. "Why Firms Voluntarily Disclose Bad-News," Journal of Accounting Research, Wiley Blackwell, vol. 32(1), pages 38-60.
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    3. Julie Cotter & Irem Tuna & Peter D. Wysocki, 2006. "Expectations Management and Beatable Targets: How Do Analysts React to Explicit Earnings Guidance?," Contemporary Accounting Research, John Wiley & Sons, vol. 23(3), pages 593-624, September.
    4. Ron Kasznik & Maureen F. McNichols, 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, June.
    5. David C. Burgstahler & Michael J. Eames, 2003. "Earnings Management to Avoid Losses and Earnings Decreases: Are Analysts Fooled?," Contemporary Accounting Research, John Wiley & Sons, vol. 20(2), pages 253-294, June.
    6. Scott Richardson & Siew Hong Teoh & Peter D. Wysocki, 2004. "The Walk†down to Beatable Analyst Forecasts: The Role of Equity Issuance and Insider Trading Incentives," Contemporary Accounting Research, John Wiley & Sons, vol. 21(4), pages 885-924, December.
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    More about this item

    Keywords

    Expectations Management; Earnings Guidance; Managerial Guidance; Regulation FD; Analysts’ Expectations;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

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