The Effect of Meeting Analyst Forecasts and Systematic Positive Forecast Errors on the Information Content of Unexpected Earnings

Lopez, Thomas J.; Rees, Lynn L.

doi:10.2139/ssrn.181929

Cited by 40 publications

(56 citation statements)

References 14 publications

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“…Our results (not presented here) show that both MBE have become more prevalent in recent years, as documented by previous research (see, for example, Brown, 1997) as well as contemporaneous studies (see Brown, 2001;Lopez and Rees, 2000;Matsumoto, 2001). Specifically, we find that the proportion of favorable earnings surprises increased from about 50% in the years 1983-1993 to almost 70% in the more recent period of 1994-1997.…”

Section: Frequency Of Mbesupporting

confidence: 88%

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The rewards to meeting or beating earnings expectations

Bartov

Givoly

Hayn

2002

Journal of Accounting and Economics

1,310

390

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This paper finds that firms that meet or beat current analysts' earnings expectations (MBE) enjoy a higher return over the quarter than firms with similar quarterly earnings forecast errors that fail to meet these expectations. Further, such a premium to MBE, although somewhat smaller, exists in the cases where MBE is likely to have been achieved through earnings or expectations management. The findings also indicate that the premium to MBE is a leading indicator of future performance. This premium and its predictive ability are only marginally affected by whether the MBE is genuine or the result of earnings or expectations management. r 2002 Elsevier Science B.V. All rights reserved.

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Section: Frequency Of Mbesupporting

confidence: 88%

“…However, this future profitability is not fully captured by analysts' revisions of future earnings estimates. Lopez and Rees (2000) find that the earnings response coefficient (ERC) is significantly higher for firms that meet analysts' forecasts.…”

Section: Recent Studies On Mbementioning

confidence: 93%

The rewards to meeting or beating earnings expectations

Bartov

Givoly

Hayn

2002

Journal of Accounting and Economics

1,310

390

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“…al., 2002;Lopez and Rees, 2001;Matsumoto, 2002;Brown and Caylor, 2003). Our main objective is to examine whether the degree of earnings management increased over time and reached a zenith in the period surrounding the corporate accounting scandals, and declined after the passage of SOX.…”

Section: Motivation Research Questions and Hypothesesmentioning

confidence: 99%

Real and Accrual-Based Earnings Management in the Pre- and Post-Sarbanes-Oxley Periods

Cohen

Dey

Lys³

2008

The Accounting Review

2,324

1,074

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We document that accrual-based earnings management increased steadily from 1987 until the passage of the Sarbanes Oxley Act (SOX) in 2002, followed by a significant decline after the passage of SOX. Conversely, the level of real earnings management activities declined prior to SOX and increased significantly after the passage of SOX, suggesting that firms switched from accrual-based to real earnings management methods after the passage of SOX. We also find evidence that the accrual-based earnings management activities were particularly high in the period immediately preceding SOX. Consistent with these results, we find that firms that just achieved important earnings benchmarks used less accruals and more real earnings management after SOX when compared to similar firms before SOX. Finally, our analysis provides evidence that the increases in accrual-based earnings management in the period preceding SOX were concurrent with increases in the fraction of equity based compensation.1

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“…al., 2002;Lopez and Rees, 2001). This literature also provides evidence that managerial propensity to avoid negative earnings surprises has increased significantly over time (Brown, 2001;Bartov et.…”

Section: Related Studiesmentioning

confidence: 99%

Trends in Earnings Management and Informativeness of Earnings Announcements in the Pre- and Post-Sarbanes Oxley Periods

Dey²,

2005

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We document that firms' management of accounting earnings increased steadily from 1987 until the passage of the Sarbanes Oxley Act (SOX), with a significant increase during the period prior to SOX, followed by a significant decline after passage of SOX. However, the increase in earnings management preceding SOX was primarily in poorly performing industries. We also show that the informativeness of earnings increased steadily over time, and there was no significant change in earnings informativeness following the passage of SOX. Further, we find that earnings management increased the absolute informativeness of earnings, but reduced the informativeness for a given earnings surprise, as well as reduced the abnormal return for a given amount of earnings surprise. Finally, the evidence supports the hypothesis that the opportunistic behavior of managers, primarily related to the fraction of compensation derived from options, was significantly associated with earnings management in the period preceding SOX.1

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The Effect of Meeting Analyst Forecasts and Systematic Positive Forecast Errors on the Information Content of Unexpected Earnings

Cited by 40 publications

References 14 publications

The rewards to meeting or beating earnings expectations

The rewards to meeting or beating earnings expectations

Real and Accrual-Based Earnings Management in the Pre- and Post-Sarbanes-Oxley Periods

Trends in Earnings Management and Informativeness of Earnings Announcements in the Pre- and Post-Sarbanes Oxley Periods

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