Does earning management meet analysts' forecasts? — A perspective of earnings surprises of Chinese listed companies

摘要

This paper uses distribution test and Ordinary Least Square (OLS) regression model and cross-sectional Jones model to get the evidence which listed companies manage their earnings in order to meet analysts' forecasts. The empirical analysis concentrates on the companies which disclosure analysts' forecasts information in 2009. The findings generally indicate that companies tend to use earnings management to improve their financial numbers and subsequently reinforce their compensation and meet analysts' forecasts. We find out that the motive is significant when earnings surprises lies in sections of (−5%, +10%). The results suggest that policy makers and investors should assess earnings quality in conjunction with management activity. Investors may use earnings surprise as supplemental signals about the lack of permanence of earnings innovations.