A discussion of ‘‘Do managers use earnings guidance
to inﬂuence street earnings exclusions?’’
Mark T. Bradshaw
Published online: 11 May 2011
Ó Springer Science+Business Media, LLC 2011
Abstract It is well known that both managers and analysts frequently deﬁne
earnings by excluding various amounts from GAAP earnings. Christensen et al.
(Rev Account Stud, 2011) make a prediction of causality whereby managers
actively inﬂuence how analysts deﬁne earnings. They argue that the mechanism
through which managers accomplish this is guidance of analysts’ earnings forecasts
within a ﬁscal period. Using a large sample of ﬁrms actively followed by analysts,
the authors examine whether the existence of earnings guidance is associated with
higher levels of total exclusions in analysts’ deﬁnition of earnings. The study
provides suggestive evidence that managers actively inﬂuence analysts’ deﬁnition
of earnings that they forecast. However, the indirect nature of the research design
calls for additional work to speciﬁcally link directed guidance of GAAP earnings
exclusions to amounts actually excluded by analysts.
Keywords Street earnings Á Earnings guidance Á Special items Á
Pro forma guidance Á Analyst forecasts
JEL Classiﬁcation M40
Data Availability: The data are available from the public sources identiﬁed in the text.
This discussion has beneﬁted from the comments of participants at the 2010 Review of Accounting
Studies Conference and Tim Gray.
M. T. Bradshaw (&)
Boston College, 140 Commonwealth Avenue, Chestnut Hill, MA 02467, USA
Rev Account Stud (2011) 16:528–538