Trading incentives to meet the analyst forecast

Trading incentives to meet the analyst forecast We examine stock sales as a managerial incentive to help explain the discontinuity around the analyst forecast benchmark. We find that the likelihood of just meeting versus just missing the analyst forecast is strongly associated with subsequent managerial stock sales. Moreover, we provide evidence that managers manage earnings prior to just meeting the threshold and selling their shares. Finally, the relation between just meeting and subsequently selling shares does not hold for non-manager insiders, who arguably cannot affect the earnings outcome, and is weaker in the presence of an independent board, suggesting that good corporate governance mitigates this strategic behavior. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Accounting Studies Springer Journals

Trading incentives to meet the analyst forecast

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Publisher
Kluwer Academic Publishers-Plenum Publishers
Copyright
Copyright © 2006 by Springer Science+Business Media, LLC
Subject
Business and Management; Accounting/Auditing; Corporate Finance; Public Finance
ISSN
1380-6653
eISSN
1573-7136
D.O.I.
10.1007/s11142-006-9017-9
Publisher site
See Article on Publisher Site

Abstract

We examine stock sales as a managerial incentive to help explain the discontinuity around the analyst forecast benchmark. We find that the likelihood of just meeting versus just missing the analyst forecast is strongly associated with subsequent managerial stock sales. Moreover, we provide evidence that managers manage earnings prior to just meeting the threshold and selling their shares. Finally, the relation between just meeting and subsequently selling shares does not hold for non-manager insiders, who arguably cannot affect the earnings outcome, and is weaker in the presence of an independent board, suggesting that good corporate governance mitigates this strategic behavior.

Journal

Review of Accounting StudiesSpringer Journals

Published: Oct 4, 2006

References

  • CEO stock option awards and the timing of corporate voluntary disclosures
    Aboody, D.; Kasznik, R.

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