Can stock recommendations predict earnings management and analysts' earnings forecast errors?

• 成果类型: Article
• 署名作者: Abarbanell, J; Lehavy, R
• 署名单位: University of North Carolina; University of North Carolina Chapel Hill; University of Michigan System; University of Michigan
• 刊物名称: JOURNAL OF ACCOUNTING RESEARCH
• ISSN/ISSBN: 0021-8456
• DOI: 10.1111/1475-679X.00093
• 发表日期: 2003
• 页码: 1-31
• 关键词: bonus schemes; bad-news; manipulation; profits; CHOICE; MARKET; plans

摘要

In this article we present evidence that a firm's stock price sensitivity to earnings news, as measured by outstanding stock recommendation, affects its incentives to manage earnings and, in turn, affects analysts' ex post forecast errors. In particular, we find a tendency for firms rated a Sell (Buy) to engage more (less) frequently in extreme, income-decreasing earnings management, indicating that they have relatively stronger (weaker), incentives to create accounting reserves especially in the form of earnings baths than other firms. In contrast, firms rated a Buy (Sell) are more (less) likely to engage in earnings management that leaves reported earnings equal to or slightly higher than analysts' forecasts. Our empirical results provide direct evidence of purported, but heretofore, weakly documented equity market incentives for firms to manage earnings. They are also consistent with a growing body of literature that finds analysts either cannot anticipate or are not motivated to anticipate completely in their forecasts firms' efforts to manage earnings.