This study documents that the number of firms that MBE has declined in the early 2000s. Furthermore, the results of the study suggest that the market detects expectations management and applies a discount to firms that use this strategy to MBE. The findings also indicate that prior to Regulation Fair Disclosure, the market is surprised by earnings announcements and reacts differently to the strategies used to MBE. Subsequent to Regulation Fair Disclosure, however, the market is aware of downward expectations management and does not react differently to strategies used to MBE. This study contributes to the literature by using a sample that includes a post Regulation Fair Disclosure and Sarbanes-Oxley Act time period. It also extends the literature by jointly examining the market reaction to two strategies that previously had been examined independently. The results of this study are helpful to standard and policy setters who devise laws to improve financial reporting and investor confidence in the capital markets.-- Abstract.

This book is a study of earnings management, aimed at scholars and professionals in accounting, finance, economics, and law. The authors address research questions including: Why are earnings so important that firms feel compelled to manipulate them? What set of circumstances will induce earnings management? How will the interaction among management, boards of directors, investors, employees, suppliers, customers and regulators affect earnings management? How to design empirical research addressing earnings management? What are the limitations and strengths of current empirical models?

Preface; The Role of Revenues and Costs in CEO Compensation; The Importance of Intellectual Capital Reporting: Perspectives from Finance Professionals; Has Regulation Changed the Market's Reward for Meeting or Beating Expectations?; Reaction of the Brazilian Stock Market to Positive and Negative Shocks; Earnings Management to Meet Earnings Benchmarks: Evidence from Japan; Audit in Ukraine; Auditor Reputation and Auditor Independence: Evidence from an Emerging Market; Trends of the Returns-Earnings Associations Over the Last Three Decades; Managers' Discretionary Behaviour, Earnings Management and Corporate Governance: An Empirical International Analysis; Index.

Recent research results indicate a market premium for firms that met or beat analysts' forecasts. We find evidence consistent with these results. More important, however, we find a market premium for firms that met or beat time-series forecasts, and also the highest market premium for firms that met or beat both analysts' and time-series forecasts, relative to firms that met or beat one or neither forecast. In fact, there is no premium for firms that met or beat only analysts' or only time-series forecasts. Investors seem to consider both analysts' and time-series forecasts jointly, with the act of meeting or beating both forecasts providing the most credible signal of superior future financial performance. This 'credibility' premium to firms that met or beat time-series forecasts (as proxied for by the Foster model, 1977) is in addition to the premium for meeting or beating analysts' forecasts. The premium is supported by assessments of future financial performance over the two subsequent years and by tests of the predictability of earnings for the following quarter. Finally, we find that abnormal trading was greatest when both forecasts were met or beaten, compared to when only one or the other or neither forecast was met or beaten. This is further evidence that investors view the meeting or beating of both forecasts as the strongest signal of enhanced credibility in reported earnings.

Conflicts of interest arise naturally in all walks of life, particularly in business life. As general and indeed inevitable phenomena, conflicts of interest should not be prohibited but properly managed. This book presents indepth analysis of such management in three areas of corporate governance where the conflict-of-interest problems are particularly acute: executive compensation, financial analysis, and asset management. ""Conflicts of Interest"" presents the results of a two-year-long research project bringing together academics and practitioners in both law and finance from Europe and the.

"I develop and explore a new dimension of earnings guidance - guidance consistency. Contrary to the conventional view that managers make an independent guidance decision each period, I find empirical support for the dynamic disclosure theory, which argues that managers consider earnings guidance as a multi-period decision and try to maintain consistency in guidance. Once I account for past guidance in a logistic model, several known guidance determinants are no longer significant in explaining management guidance decisions. In contrast, past guidance remains significant both statistically and economically across various specifications, suggesting that management guidance decisions are largely predetermined. Moreover, the guidance consistency measure is more robust than the conventional frequency-based 'habitual' variable in explaining future guidance. The results still hold in a Heckman selection model and after propensity score matching, mitigating the concern that guidance consistency is merely driven by firms operating in stable environments. Moreover, firms with a history of consistent (inconsistent) guidance are less (more) responsive to various guidance determinants, and omit guidance primarily due to lack of private information (past unsuccessful expectation management). Compared with inconsistent guiders, consistent guiders are more likely to: (a) guide earlier in the quarter; (b) bundle guidance with earnings announcements; (c) issue guidance even when analyst forecasts are already aligned with managers' own estimates; and (d) also maintain consistency in their guidance timing or specificity. After controlling for analyst forecasts before guidance, their forecasts after guidance are more likely to be aligned with guidance issued by consistent guiders than by inconsistent guiders. My evidence suggests that both managers and analysts view guidance as a multi-period decision, supporting the dynamic disclosure theory"--Page iv.