Achieving Revenue Benchmarks Conditional on Growth Properties

Dong Hyun Son and Dongkuk Lim
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Dong Hyun Son: College of Business, Hankuk University of Foreign Studies, 107 Imun-ro, Dongdaemun-gu, Seoul 02450, Korea
Dongkuk Lim: Seaver College, Business Division, Pepperdine University, Malibu, CA 90263, USA

Sustainability, 2017, vol. 9, issue 6, 1-15

Abstract: This study examines whether certain firm characteristics, specifically growth properties, are associated with the likelihood of achieving market expectations for revenues, as well as which mechanism (revenue manipulation or expectation management) growth firms utilize in order to avoid missing these expectations. The results show that growth firms are more likely to meet or exceed analyst revenue forecasts than non-growth firms. We also find that growth firms are more inclined to manipulate their reported revenues upwards, and less inclined to guide market expectations for revenues downward, in order to meet or beat expected revenues relative to non-growth firms. These findings suggest that window-dressing activities by growth firms may not be sustainable in the long-run and can misguide users of financial statements in their decision-making.

Keywords: growth; sustainability; revenue manipulation; revenue expectations management; revenue forecasts (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2017
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