Date of Award
5-9-2014
Degree Type
Dissertation
Degree Name
Doctor of Philosophy (PhD)
Department
Accountancy
First Advisor
Dr. Siva Nathan
Second Advisor
Dr. Lawrence D. Brown
Third Advisor
Dr. Nerissa C. Brown
Fourth Advisor
Dr. Laura Swenson
Abstract
Prior literature shows firms manage analysts’ earnings expectations downward to avoid negative earnings surprises. Recent studies find an increasing number of analysts forecast both cash flow and earnings, providing two explicit targets managers seek to achieve. Nonetheless, the literature is unclear on whether firms manage analysts’ operating cash flow and/or accrual components of expected earnings to meet or beat analysts’ cash flow and earnings forecasts, and which firm characteristics motivate firms to engage in the expectations management strategies. This study decomposes earnings expectations management into its two mutually exclusive and collectively exhaustive parts: cash flow expectations management and accrual expectations management, and examines whether cross-sectional differences in the likelihood of firms engaging in downward cash flow or accrual expectations management depend on firm-specific characteristics. Overall, I find firms with lower cash flow growth and firms that miss prior-period cash flow forecasts engage in downward cash flow expectations management, and these firms engage in downward cash flow expectations management over and above downward accrual expectations management. I also find firms with better financial health, larger market shares, lower institutional ownership and less bloated balance sheets are likely to walk down both analysts’ cash flow and accrual forecasts.
DOI
https://doi.org/10.57709/5490852
Recommended Citation
Ruangprapun, Jomsurang, "Cash flow versus accrual expectations management to meet or beat analyst cash flow and earnings forecasts." Dissertation, Georgia State University, 2014.
doi: https://doi.org/10.57709/5490852