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Title: Short-term earnings guidance and accrual-based earnings management
Authors: Call, A.C.
Chen, S.
Miao, B. 
Tong, Y.H.
Keywords: Abnormal accruals
Discretionary revenues
Earnings guidance
Earnings management
Management forecasts
Issue Date: 2014
Citation: Call, A.C., Chen, S., Miao, B., Tong, Y.H. (2014). Short-term earnings guidance and accrual-based earnings management. Review of Accounting Studies 19 (2) : 955-987. ScholarBank@NUS Repository.
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. © 2014 Springer Science+Business Media New York.
Source Title: Review of Accounting Studies
ISSN: 13806653
DOI: 10.1007/s11142-013-9270-7
Appears in Collections:Staff Publications

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