The market reward to achieving analyst earnings expectations: Does expectations or earnings management fool investors?

We explore the capital market consequences of achieving analyst earnings expectations,distinguishing between expectations achieved genuinely or through earnings guidance ormanagement. We examine an inclusive set of earnings management tools: real earningsmanagement, working capital accruals management, and classification shifting. Our resultsshow that while the market rewards firms that achieve analyst expectations through genuineperformance, it does not reward firms that engage in earnings forecast guidance and itreduces the reward for firms that engage in real earnings management, working capitalaccruals management, and classification shifting....