Short-term earnings guidance and accrual-based earnings management

Andrew Call, Shuping Chen, Bin Miao, Yen H. Tong

Research output: Contribution to journalArticlepeer-review

47 Scopus citations


Motivated by recent practitioners' concerns that short-term earnings guidance leads to managerial myopia, we investigate the impact of short-term earnings guidance on earnings management. Using a propensity-score matched control sample, we find strong and consistent evidence that the issuance of short-term quarterly earnings guidance is associated with less, rather than more, earnings management. We also find that regular guiders exhibit less earnings management than do less regular guiders. Our findings hold using both abnormal accruals and discretionary revenues to measure earnings management and after controlling for potential reverse causality concerns. Furthermore, in a setting where managers have particularly strong capital market incentives to manage earnings, we corroborate these findings by documenting that earnings guidance either has no impact on or mitigates earnings management. Overall, our evidence does not support the criticism from practitioners that short-term earnings guidance leads to more earnings management.

Original languageEnglish (US)
Pages (from-to)955-987
Number of pages33
JournalReview of Accounting Studies
Issue number2
StatePublished - Jun 2014


  • Abnormal accruals
  • Discretionary revenues
  • Earnings guidance
  • Earnings management
  • Management forecasts

ASJC Scopus subject areas

  • Accounting
  • General Business, Management and Accounting


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