This paper explores the ability of investors and analysts to fully process available pension information when establishing prices and making earnings forecasts. I find that neither prices nor forecasts fully reflect the quantifiable future earnings effects of changes in pension information at the time it becomes publicly available in the firm's 10-K. Instead, the evidence suggests that investors and analysts only gradually incorporate this information into prices and forecasts as they observe the effects of the pension plan changes on subsequent quarterly earnings. The persistent tardiness of analysts to incorporate this relevant and economically significant information about earnings is surprising given that they are provided with pension information on a repeated and timely basis. Additionally, I find that the off-balance-sheet portion of the pension plan's funded status and the PBO are predictive of future returns while the on-balance-sheet portion of the funded status is not. This implies that investors do not accurately assess the long-run cash flow and earnings implications of these off-balance-sheet pension disclosures. The compensation rate is also predictive of future returns suggesting that it signals management's expectation of future performance.

This paper examines the performance consequences of cutting discretionary expenditures and managing accruals to exceed analyst forecasts. We show that firms that just beat analyst forecasts with low quality earnings exhibit a short-term stock price benefit relative to firms that miss forecasts with high quality earnings. This trend, however, reverses over a 3-year horizon. Additionally, firms reducing discretionary expenditures to beat forecasts have significantly greater equity issuances and insider selling in the following year, consistent with managers understanding the myopic nature of their actions. Our results confirm survey evidence suggesting managers engage in myopic behavior to beat benchmarks.

ABSTRACT This paper examines the performance consequences of cutting discretionary expenditures and managing accruals to exceed analyst forecasts. We show that firms that just beat analyst forecasts with low quality earnings exhibit a short‐term stock price benefit relative to firms that miss forecasts with high quality earnings. This trend, however, reverses over a 3‐year horizon. Additionally, firms reducing discretionary expenditures to beat forecasts have significantly greater equity issuances and insider selling in the following year, consistent with managers understanding the myopic nature of their actions. Our results confirm survey evidence suggesting managers engage in myopic behavior to beat benchmarks.