00Thaler_FM i-xxvi.qxd

Consider a date t=1 bid Bfor which the firm can be sold. This value may in general exceed ET(y 2 ). This may be true because of ...

is likely to vary by firm. If all managers are optimistic, and markets are effi- cient (or at least are less optimistic about pa ...

information, it may not explain the rich results on announcement effects, nor can it account for the importance of legal mechani ...

References Anders, G., 1992, Merchants of Debt, Basic. Avery, C., J. A. Chevalier, and S. Schaefer, 1998, Why Do Managers Undert ...

Kamath, R. R., 1997, Long-Term Financing Decisions: Views and Practices of Fi- nancial Managers of NYSE Firms, Financial Review3 ...

Chapter 18 EARNINGS MANAGEMENT TO EXCEED THRESHOLDS François Degeorge, Jayendu Patel, and Richard Zeckhauser Introduction Anal ...

and so on. Moreover, they can defer expenses or boost revenues, say, by cutting prices. Thus, executives have both the incentive ...

Burgstahler and Dichev (1997) examine the management of earnings to meet our first two thresholds, though not in relation to ana ...

greater earnings tomorrow may not represent a desirable trade-off. When earnings are near the unacceptable range, executives’ in ...

firms that are more likely to have managed earnings upward to attain a threshold in a particular year underperform in the subseq ...

numbers in human thought processes.^10 Hence, this dividing line carries over for the threshold on absolute earnings. When looki ...

communicated. A statement that they have been up five out of six years, and only fell by 1 percent in the off year, is less easi ...

The analysts’ consensus estimate, unlike our other thresholds, is endoge- nous. Although executives try to report earnings that ...

substantial cut in bonus. For simplicity, we assume that at all earnings lev- els other than at the thresholds the incentives fo ...

serve as a benchmark for a second effect. For period 1, the benchmark is R 0 , which is normalized to zero for exposition, and t ...

To illustrate, we choose R 0 =0, β=1, γ=10, and δ=1; hence, f(R 1 )= R 1 +v(R 1 ,0). Earnings have a normal distribution each pe ...

tomorrow (taking the optimal sacrifice in earnings). Left of Z, the optimal bath gives a higher payoff than striving. Right of Z ...

which we compare the empirical distributions below. The dark shaded areas below the horizontal show shortfalls in the density, i ...

both diminish. Where borrowing earnings had been most extreme, the ex- ecutive saves instead for a better tomorrow.^21 The next ...

A. Data and Construction of Variables Our data set consists of quarterly data on 5,387 firms providing partial or complete data ...