We find that analysts' forecast errors are predicted by past accounting accruals (adjustments to cash flows to obtain reported earnings) among both equity issuers and non-issuers. Analysts are more optimistic for the subsequent four years for issuers reporting higher issue-year accruals. The...

This paper examines the dynamic behavior of analysts' earnings forecasts over the twelve months preceding annual earnings announcements. We investigate the claim that analysts make optimistic forecasts at the start of the year and then 'walk down' their estimates to a level the firm is likely to...

A larger CEO network can reduce the cost of equity by reducing information asymmetry between the firm and outsiders, and by increasing trust between the firm and stakeholders. Alternatively, a larger CEO network can increase the cost of equity because higher CEO connectedness encourages greater...

Security regulators and the business press have alleged that firms play an 'earnings-guidance game' where analysts make optimistic forecasts at the start of the year and then 'walk down' their estimates to a level the firm can beat by the end of the year. In a comprehensive sample of I/B/E/S...

We offer here the psychological attraction approach to accounting and disclosure rules, regulation, and policy as a program for positive accounting research. We suggest that psychological forces have shaped and continue to shape rules and policies in two different ways. (1) Good Rules for Bad...

We investigate empirically whether mispricing of a firm's stock affects CEO equity-based compensation, controlling for industry and year effects, economic determinants, board characteristics, and institutional ownership. We hypothesize that an overvalued firm may award higher grants to meet the...

We find a positive association between short-selling and accruals during 1988-2009, and that asymmetry between the long and short sides of the accrual anomaly is stronger when constraints on short-arbitrage are more severe (low availability of loanable shares as proxied by institutional...

It has been alleged that firms and analysts engage in an earnings guidance game where analysts first issue optimistic earnings forecasts and then 'walk down' their estimates to a level firms can beat at the official earnings announcement. We examine whether the walk-down to beatable targets is...

We find that analysts' forecast errors are predicted by past accounting accruals (adjustments to cash flows to obtain reported earnings) among both equity issuers and non-issuers. Analysts are more optimistic for the subsequent four years for issuers reporting higher issue-year accruals. The...

Loughran and Ritter (1995) document that firms issuing seasoned equity offerings (SEOs) severely underperform the stock market for three to five years after the offering. Our paper examines the hypothesis that SEO investors are too optimistic because they naively extrapolate earnings trends...