University of Sussex
Bagntasarian, Anachit.pdf (2.18 MB)

The impact of CEO compensation, analysts’ characteristics, earnings management and country governability on analysts’ earnings forecasts.

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posted on 2023-06-09, 13:52 authored by Anachit Bagntasarian
This thesis examines the impact of CEO compensation, analysts’ characteristics, earnings management and country governability on the accuracy of analysts’ earnings forecasts. In summary, the thesis includes the following chapters: Firstly, Chapter 2 examines the interplay between CEO compensation and analysts’ forecast errors over different forecasting horizons. A unique analyst-level sample for U.S. firms covering the period between 1992 and 2015 has been employed. Evidence obtained from this analysis suggests that CEO compensation, measured by various forms such as restricted stock holdings and stock ownership would correct for optimism in analysts’ earnings forecasts, whereas CEO bonus and sensitivity to changes in firm’s value would exacerbate analysts’ optimism. Results also show that CEO compensation would augment the effect of earnings management on analysts’ forecasts with CEO bonus being of importance. The findings of this chapter also indicate that analysts’ characteristics and regulation can affect earnings forecasts. Next, Chapter 3 investigates the effect of governance on analysts’ earnings forecasts. By employing a comprehensive dataset of 911 U.S. firms for the period 2000 – 2014, this chapter demonstrates a strong positive association between the government effectiveness and analysts’ earnings forecasts. We extend this analysis employing corporate governance variables such as CEO equity incentives and CEO power, whilst a possible cross-term association between governability and the former has also been examined. This chapter explores further the effects of earnings management on analysts’ forecasts accuracy documenting a negative impact of the former on the latter. Lastly, underlying causality strands and endogeneity issues are addressed opting for a flexible panel VAR model. Finally, Chapter 4 presents evidence of the effects of corruption on the accuracy of analysts’ forecasts. Using a global sample, this chapter reveals that analysts face greater difficulty in forecasting earnings in advanced and emerging countries due to the detrimental effect of corruption. Interestingly, findings suggest that for firms located in developing countries, corruption enhances analysts’ accuracy. This chapter also shows that the effect of earnings manipulation on the accuracy of forecasts is aggravated in the presence of corruption, whilst greater country freedom would enhance analysts’ accuracy when corruption is present.


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  • doctoral

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  • eng


University of Sussex

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