Earnings Management to Avoid Losses and Earnings Decreases: Are Analysts Fooled?*

By D. Burgstahler, Michael Eames. 2003

356 citations recorded by the source corpus.

Subfields: Accounting, Finance, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/2d074b99859aa4d594f9c4f37d2a587e6b765d70

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Accounting

In Finance

In Strategy and Management

Citations in the corpus

How far can we trust earnings numbers? What research tells us about earnings management (2013, methodology): “All of these articles make use of the ‘suspicious threshold’ methodology of Burgstahler and Dichev (1997), and Burgstahler and Eames (2003, 2006).13 Gore et al. (2007) go further and combine the suspicious threshold methodology, by comparing earnings numbers before and after DACCs, i.e. pre-managed…”
Earnings management and accounting income aggregation (2007, neutral): “DeGeorge et al. (1999) and Burgstahler and Eames (2003) also report similar discontinuities around analysts’ forecasts of earnings.3 Some recent studies question whether earnings management is responsible for the discontinuity around zero in the distribution of scaled earnings, scaled earnings…”
Financial Reporting Transparency and Earnings Management (2006, result): “Our experimental approach is most similar to Cloyd et al. (1996), who study the effects of managers' incentives at public versus private firms on the importance of tax and book conformance; Kennedy et al.”
Equity Incentives and Earnings Management (2005, neutral): “…ExecuComp database for the period 1993- 2000.8 We exclude financial institutions (SICs between 6000 and 6999) and utilities (SICs between 4400 and 5000) because managers in these regulated industries might have different motivations to manage earnings (Burgstahler and Eames 2003, among others).”
The Financial Analyst Forecasting Literature: A Taxonomy with Suggestions for Further Research (2008, background): “Burgstahler and Eames (2003) find that analysts' forecasts reflect a general awareness of firms' incentives to manage earnings in order to barely avoid reporting losses, but the study finds no evidence that analysts can anticipate which firms will engage in this behavior.”
The Nature of Accounting Information Reliability: Inferences from Archival and Experimental Research (2006, background): “…consider the growing number of studies that document discontinuities in the distribution of earnings numbers, implying earnings management by firms to avoid reporting losses, avoid earnings declines, or beat earnings expectations (e.g., Burgstahler and Dichev 1997, Burgstahler and Eames 2003).”
Understanding Earnings Quality: A Review of the Proxies, Their Determinants and Their Consequences (2010, background): “…suggest that target beating is an indication of earnings management, and the presumed contradictory results in other studies (i.e., Bhojraj et al., 2009; Bartov et al., 2002; Abarbanell and Lehavy, 2003; Burgstahler and Eames, 2003) are due to an errant assumption of market (or analyst) efficiency.”
A study of earnings-management motives in the Anglo-American and Euro-Continental accounting models: The Canadian and French cases (2006, neutral): “…as stock offering (Erickson & Wang, 1999; Shivakumar, 2000; Teoh, Welch, & Wong, 1998), avoiding decreases and losses (Burgstahler & Dichev, 1997; Burgstahler & Eames, 2003) and meeting thresholds such as analysts' and management's forecasts (Burgstahle & Eames, 1998; Degeorge, Patel, &…”
Institutional ownership, product market competition, and earnings management: Some evidence from international data (2018, background): “As indicated above, the financial industry (6000~) is dropped from the sample in line with Burgstahler and Eames (2003), Gupta et al. (2008), and others.”