We found a match
Your institution may have rights to this item. Sign in to continue.
- Title
Short-term earnings guidance and accrual-based earnings management.
- Authors
Call, Andrew; Chen, Shuping; Miao, Bin; Tong, Yen
- Abstract
Motivated by recent practitioners' concerns that short-term earnings guidance leads to managerial myopia, we investigate the impact of short-term earnings guidance on earnings management. Using a propensity-score matched control sample, we find strong and consistent evidence that the issuance of short-term quarterly earnings guidance is associated with less, rather than more, earnings management. We also find that regular guiders exhibit less earnings management than do less regular guiders. Our findings hold using both abnormal accruals and discretionary revenues to measure earnings management and after controlling for potential reverse causality concerns. Furthermore, in a setting where managers have particularly strong capital market incentives to manage earnings, we corroborate these findings by documenting that earnings guidance either has no impact on or mitigates earnings management. Overall, our evidence does not support the criticism from practitioners that short-term earnings guidance leads to more earnings management.
- Subjects
ACCRUAL basis accounting; EARNINGS management; EARNINGS forecasting; BUSINESS revenue; CAPITAL market; LABOR incentives; EXECUTIVES
- Publication
Review of Accounting Studies, 2014, Vol 19, Issue 2, p955
- ISSN
1380-6653
- Publication type
Article
- DOI
10.1007/s11142-013-9270-7