We investigate whether firms use stock repurchases to meet or beat analysts’ earnings per share (EPS) forecasts. We identify conditions under which repurchases increase EPS and document the frequency of accretive repurchases from 1988 to 2001. We find a disproportionately large number of accretive stock repurchases among firms that would have missed analysts’ forecasts without the repurchase. The repurchase-induced component of earnings surprises appears to be discounted by the market, and this discount is larger when the repurchase seems motivated by EPS management, although using the repurchase to avoid missing analyst forecasts appears to mitigate some of the negative stock price response.

This paper investigates whether the accrual pricing anomaly documented by Sloan (1996. The Accounting Review 71(3), 289–316) for annual data holds for quarterly data and whether this form of market mispricing is distinct from the post-earnings announcement drift anomaly. We find that the market appears to overestimate the persistence of the accrual component of quarterly earnings and, therefore, tends to overprice accruals. Moreover, the accrual mispricing appears to be distinct from post-earnings announcement drift. A hedge portfolio trading strategy that exploits both forms of market mispricing generates abnormal returns in excess of those based on either unexpected earnings or accruals information alone.

Earnings asymmetric timeliness captures both accrual and operating cash flow (CFO) asymmetric timeliness. Because recognition of operating cash flows does not reflect differential verification thresholds for recognizing unrealized gains versus losses, CFO asymmetry adds noise or bias to tests of conditional conservatism. We show that CFO asymmetry is predictable in the cross-section, and varies systematically with life-cycle characteristics. Removing CFO from earnings and using accruals-based measures of asymmetric timeliness eliminates several biases that prior studies have attributed to other sources. Moreover, accrual asymmetric timeliness varies in the cross-section as theory predicts. Going forward, we recommend researchers use accruals-based asymmetric timeliness measures when testing for conditional conservatism.

We survey corporate managers of both guiding and non-guiding firms. We find that managers of firms that provide guidance say that they: (1) primarily provide guidance to satisfy analyst and investor demands and manage analysts’ earnings expectations; (2) are relatively unconcerned about proprietary or litigation costs (managers of non-guiding firms are more likely to see litigation risk as a concern); (3) predominantly issue guidance that is conservative relative to their internal expectations; (4) are concerned that guidance induces analysts and investors to focus on the short-term but not that it induces managers themselves to make myopic decisions internally. We also find that managers are miscalibrated about the accuracy of their guidance and that significant quantities of guidance that managers say their firms issue are not captured by conventional sources. We offer several other new insights relevant to the voluntary disclosure literature.

We examine whether managerial sentiment is associated with errors in accrual estimates. Using public banks we find (1) managerial sentiment is negatively associated with loan loss provision estimates, (2) future charge-offs per dollar of provision are positively associated with sentiment when the provision is estimated, and (3) the effects of sentiment are greater for firms with more uncertain charge-offs. Results are similar for private banks, suggesting accrual manipulation related to capital market incentives is unlikely to explain the results. Although economic fundamentals explain most of the variation in the provision, we find sentiment has an incremental and economically meaningful effect.