Earnings Management and Analysts’ Forecast Accuracy: Evidence for Romanian Companies

Author:Univ. Lecturer Mihaela IONAŞCU, Ph. D.

JEL:G32, M41

DOI:

Keywords:earnings management, analysts’ forecasts accuracy, emergent markets

Abstract:
The purpose of this paper is to investigate the extent to which earnings management practices of Romanian listed companies have a negative impact on analysts’ forecasts accuracy. Previous studies have shown that, on developed markets, one of the main reasons companies manage their earnings is to meet analysts’ forecast, and that analysts themselves prefer to follow companies that have effective earnings management instruments, so that they pose no serious risk to their forecasts accuracy. However, on emergent markets, such as the Romanian one, it is reasonable to expect companies to manage their earnings for taxation or other contractual reasons, and that such earnings management practices could interfere with analysts’ forecasting efforts.\r\n

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