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4 years ago

Earnings manipulation impacts stock prices more than forecasts.

The Accounting Review
Capital Market Prices, Management Forecasts, and Earnings Management
Anne Beyer

Paper Summary

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The article examines how managers make earnings forecasts and manage earnings when they don't know the exact cash flow distribution. The study finds that managers manipulate earnings to reduce forecast errors, and stock prices are more influenced by actual earnings than forecasts. Additionally, when a firm has a positive earnings surprise, its stock price tends to be higher compared to when it has a negative surprise.