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JOURNAL OF ACCOUNTING AND FINANCE
A Temporal Analysis of Expectation Management: Evidence from Public Management Earnings Forecasts
Author(s): Bo Liu, Dana Zhang
Citation: Bo Liu, Dana Zhang, (2019) "A Temporal Analysis of Expectation Management: Evidence from Public Management Earnings Forecasts", Journal of Accounting and Finance, Vol. 19, ss. 7, pp. 102-124
Article Type: Research paper
Publisher: North American Business Press
Abstract:
We investigate the time trend of expectation management through management earnings forecasts to avoid negative earnings surprise. We find that the percentage of firms missing analyst earnings target before downward management guidance but meeting revised analyst earnings target have more than tripled from 5.5% in 1995 to 20.0% in 2014. We also show increase of both the magnitude of pessimistic management forecast bias and analysts’ tendency to converge to management guidance, two potential explanations for increasing expectation management. Additional analysis indicates that the increase in analyst convergence is more prominent for firms with larger downward bias in previous management forecasts.
