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Analyst Coverage and Earnings Management Using Classification Shifting

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  • Fang Zhao

Abstract

This study examines the association between analyst coverage and classification shifting. Prior studies on external monitoring factors and classification shifting provide mixed results- international studies (Haw, Ho, & Li, 2011; Behn, Gotti, Herrmann, & Kang, 2013) find that external monitoring factors mitigate classification shifting, while Abernathy, Beyer, and Rapley (2014) find that external monitoring factors promote classification shifting when accrual-based earnings management and real earnings management are constrained. Using a sample of firms in the United States, this study finds a positive association between classification shifting and an external monitoring factor- analyst coverage. This result suggests that when higher analyst coverage has stronger monitoring role on earnings management, managers are more likely to use classification shifting. The implication of this study should be of interest to financial analysts.

Suggested Citation

  • Fang Zhao, 2018. "Analyst Coverage and Earnings Management Using Classification Shifting," Accounting and Finance Research, Sciedu Press, vol. 7(3), pages 172-172, August.
    • Handle: RePEc:jfr:afr111:v:7:y:2018:i:3:p:172
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    References listed on IDEAS

    as
    1. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    2. Jones, Jj, 1991. "Earnings Management During Import Relief Investigations," Journal of Accounting Research, Wiley Blackwell, vol. 29(2), pages 193-228.
    3. Yu, Fang (Frank), 2008. "Analyst coverage and earnings management," Journal of Financial Economics, Elsevier, vol. 88(2), pages 245-271, May.
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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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