Do Corporations Manage Earnings to Meet/Exceed Analyst Forecasts? Evidence from Pension Plan Assumption Changes
Review of Accounting Studies
A significantly larger number of firms increase the expected rate of return on pension plan assets (ERR) to make their reported earnings meet/exceed analyst forecasts than would be expected by chance. In the short run, the stock market reacts positively to these firms’ earnings announcements, suggesting that investors fail to recognize that earnings benchmarks are achieved through ERR manipulation. In the long run, however, firms that employ this earnings management strategy significantly underperform control firms in both stock returns and operating performance.
Copyright © 2014, Springer
An, Heng; Lee, Yul W.; and Zhang, Ting, "Do Corporations Manage Earnings to Meet/Exceed Analyst Forecasts? Evidence from Pension Plan Assumption Changes" (2014). Economics and Finance Faculty Publications. 44.