Does analyst coverage constrain real earnings management?

Jerry Sun and Guoping Liu

The Quarterly Review of Economics and Finance, 2016, vol. 59, issue C, 131-140

Abstract: This study investigates the impact of analyst coverage on real earnings management, which is measured by using three proxies including abnormal cash flows from operations, abnormal discretionary expenses, and abnormal production costs. We document evidence that real earnings management is significantly higher when firms are followed by more analysts, suggesting that analyst coverage does not constrain real earnings management as effectively as it constrains accrual earnings management. Our findings also imply that firms with high analyst coverage have greater incentives to engage in real activities manipulation.

Keywords: Analyst coverage; Real activities; Governance role; Earnings management (search for similar items in EconPapers)
JEL-codes: G3 M4 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:59:y:2016:i:c:p:131-140

DOI: 10.1016/j.qref.2015.03.009

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