అకౌంటింగ్ & మార్కెటింగ్

Time-Series Properties of Earnings and Reporting Strategy of Earnings Surprise

Abstract

Inho Suk

This study examines whether earnings surprise management is related to the time-series property of historical earnings series (i.e., earnings persistence). The findings from my analysis indicate that firms with a higher level of earnings persistence are less likely to manipulate the earnings surprise to achieve meeting or beating earnings expectations (MBE) than firms with a lower level of earnings persistence. Further, I find that, while the market discounts the managed earnings surprise, it is less likely for firms with higher earnings persistence. This suggests that the capital market understands the role of earnings persistence in mitigating the manager’s incentive for managing the earnings surprise to attain MBE.