Analyst information precision and small earnings surprises

• 成果类型: Article
• 署名作者: Bissessur, Sanjay W.; Veenman, David
• 署名单位: University of Amsterdam
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-016-9370-2
• 发表日期: 2016
• 页码: 1327-1360
• 关键词: SELL-SIDE ANALYSTS; stock returns; SECURITY ANALYSTS; Forecast errors; BIASED EARNINGS; TRADING INCENTIVES; reported earnings; Audit quality; price changes; management

摘要

This study proposes and tests an alternative to the extant earnings management explanation for zero and small positive earnings surprises (i.e., analyst forecast errors). We argue that analysts' ability to strategically induce slight pessimism in earnings forecasts varies with the precision of their information. Accordingly, we predict that the probability that a firm reports a small positive instead of a small negative earnings surprise is negatively related to earnings forecast uncertainty, and we present evidence consistent with this prediction. Our findings have important implications for the earnings management interpretation of the asymmetry around zero in the frequency distribution of earnings surprises. We demonstrate how empirically controlling for earnings forecast uncertainty can materially change inferences in studies that employ the incidence of zero and small positive earnings surprises to categorize firms as suspected of managing earnings.