Whether the Analyst Reports Change Managers’ Behavior?
Wu Xiang, Yang Jing

Abstract
Recent reports in the business press allege that managers take actions to avoid negative earnings surprises. We hypothesize that certain firm characteristics are associated with greater incentives to avoid negative surprises. Results show that there is pervasive pessimistic bias in management forecasts, management successfully induces analysts to lower their earnings expectations to an achievable level. We also find that firms with higher institutional ownership, higher value-relevance of earnings, high-growth prospects and a long string of meeting or beating expectations are more likely to meet or exceed expectations at the earnings announcement.

Full TexT: PDF