What's my target? Individual analyst forecasts and last-chance earnings management*

• 成果类型: Article
• 署名作者: Beardsley, Erik L.; Robinson, John R.; Wong, Paul A.
• 署名单位: University of Notre Dame; Texas A&M University System; Texas A&M University College Station; Mays Business School; University of California System; University of California Davis
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2021.101423
• 发表日期: 2021
• 关键词: deferred tax assets; valuation allowance; performance; determinants; expertise; revisions; investors; accuracy; expense; rates

摘要

Kirk, Reppenhagen, and Tucker (2014) find that investors use individual analyst forecasts as additional earnings benchmarks. We investigate whether executives manage earnings to beat these individual benchmarks. Using year-end effective tax rate (ETR) manipulation as our setting, we find that firms decrease ETRs from 3rd to 4th quarter to meet or beat a greater percentage of individual forecasts. We also find some evidence that firms use incremental ETR changes to meet forecasts by key analysts. After controlling for the distance to the nearest forecast, our evidence shows that firms are more likely to beat an incremental forecast with a decrease in ETR compared to missing an incremental forecast with an increase in ETR. Our study highlights the strategic nature of earnings management by providing evidence that managers consider individual forecasts to calibrate earnings management decisions. 0 2021 Elsevier B.V. All rights reserved.