Autor(es):
Costa, Marta 
Data: 2012
Identificador Persistente: http://hdl.handle.net/10400.8/541
Origem: IC-online
Assunto(s): Expectations management; Earnings management; Analysts’ forecasts; Earnings surprise; Meet or beat expectations
Descrição
Dissertação de Mestrado em Finanças Empresariais apresentada à ESTG - Escola Superior de Tecnologia e Gestão do Instituto Politécnico de Leiria. The capital market reaction to the earnings announcement has been studied in the literature. This work focuses on market reaction to earnings announcement, whose values are similar or above analysts' forecasts, proxy for market expectations.
Consequently, after assess the relevance and timeliness of the concept to meet or beat expectations, especially the value-effect in which we present a positive earnings surprise, we have looked at the mechanisms used by management in order to report earnings above expectations.
Subsequently, and based on an approach of the earnings expectations time line, we develop our hypotheses and design our variables. To enhance the consistency of our tests, we consider two metrics to calculate the cumulative abnormal returns: the market model and market adjusted return. We analyze the existence of a market premium for firms of the DJ Stoxx 50 E, which meet or beat expectations. Then, and analyzing expectations path, we infer expectations management in the sample obtained in 636 firms-quarters.
Finally, we analyzed the association between the market premium and the existence of expectations management, based on 48 observations in which there was the likelihood of manipulation of expectations.
The results for the market premium are consistent with previous studies, and although our sample has a very small size in relation to previous studies, establish the existence of a market premium for companies that meet or beat expectations. Specifically, we obtained a higher return at 3.1% for firms that realize and exceed expectations. We can also conclude that the earnings surprise magnitude affects the return of the company.
Regarding the presence of expectations management, we detect that there is a significant difference between cases likely to exist expectations management and cases where it is less
vi
likely that there is expectation management. Thus, we can say that there is expectation management in firms and sample period.
Concerning the association between the expectations management and the market premium, the results show empirical evidence that the market premium exists when companies meet or beat expectations through expectations management. However, we could not conclude if the premium is significantly different for cases in which the MBE is genuine from those cases where the expectations management influences the fact that companies meet or beat expectations.
