Managerial optimism and earnings smoothing

Christa H.S. Bouwman

Journal of Banking & Finance, 2014, vol. 41, issue C, 283-303

Abstract: This paper empirically examines how CEO optimism affects earnings smoothing and earnings surprises. The main finding is that optimistic managers smooth earnings more than rational managers and are associated with smaller (in absolute value) earnings surprises. A possible theoretical explanation is offered for these results based on a combination of the “torpedo effect,” the innate behavior of optimists, and the risk of litigation/prosecution for over-reporting earnings.

Keywords: Smoothing; Earnings surprise; Earnings management; Behavioral (search for similar items in EconPapers)
JEL-codes: D80 M41 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:41:y:2014:i:c:p:283-303

DOI: 10.1016/j.jbankfin.2013.12.019

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