Expectations management and beatable targets: how do analysts react to explicit earnings guidance?

Cotter, Julie and Tuna, Irem and Wysocki, Peter D. (2006) Expectations management and beatable targets: how do analysts react to explicit earnings guidance? Contemporary Accounting Research, 23 (3). pp. 593-624. ISSN 0823-9150

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Abstract

This study investigates security analysts' reactions to public management guidance and assesses whether managers successfully guide analysts toward beatable earnings targets. We use a panel dataset between 1995 and 2001 to examine the fiscal-quarter-specific determinants of management guidance and the timing, extent, and outcomes of analysts' reactions to this guidance. We find that management guidance is more likely when analysts’ initial forecasts are optimistic, and, after controlling for the level of this optimism, when analysts’ forecast dispersion is low. Analysts quickly react to management guidance and they are more likely to issue final meetable or beatable earnings targets when management provides public guidance. Our evidence suggests that public management guidance plays an important role in leading analysts toward achievable earnings targets.

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Item Type:	Article (Commonwealth Reporting Category C)
Refereed:	Yes
Item Status:	Live Archive
Additional Information:	Permanent restricted access to paper due to publisher copyright restrictions.
Faculty/School / Institute/Centre:	Historic - Faculty of Business - Department of Accounting (Up to 31 Mar 2007)
Faculty/School / Institute/Centre:	Historic - Faculty of Business - Department of Accounting (Up to 31 Mar 2007)
Date Deposited:	11 Oct 2007 01:07
Last Modified:	02 Jul 2013 22:44
Uncontrolled Keywords:	analysts; earnings guidance; expectations management; management earnings forecasts
Fields of Research (2008):	15 Commerce, Management, Tourism and Services > 1501 Accounting, Auditing and Accountability > 150103 Financial Accounting 14 Economics > 1402 Applied Economics > 140209 Industry Economics and Industrial Organisation 14 Economics > 1403 Econometrics > 140303 Economic Models and Forecasting
Socio-Economic Objectives (2008):	B Economic Development > 91 Economic Framework > 9102 Microeconomics > 910208 Micro Labour Market Issues
Identification Number or DOI:	https://doi.org/10.1506/FJ4D-04UN-68T7-R8CA
URI:	http://eprints.usq.edu.au/id/eprint/2459

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