مقاله انگلیسی رایگان در مورد عملکرد یکپارچه و مدیریت درآمد – الزویر ۲۰۱۸

Firm performance is subject to common market or industry shocks. Theories therefore suggest that investors should consider peer performance when evaluating managers’ talent or efforts (Holmstrom 1982). Accordingly, some market participants adopt relative performance evaluation to control for common shocks and to discipline managers. For example, investors often apply relative valuation techniques and form their valuations by choosing comparative multiples (Bhojraj and Lee 2002). Financial analysts, as both information intermediaries and external monitors, commonly refer to industry peers when forecasting a firm’s future earnings and setting the target price. 1 Many boards use peer firms’ performance as a benchmark to determine managerial compensation (e.g., Aggarwal and Samwick 1999; Gong, Li and Shin 2011) or tenure (Jenter and Kanaan 2015). Given the importance of peer performance in both external monitoring and internal governance, a natural but important question is whether or not managers will engage in opportunistic behavior in response to peer performance. In this study, we provide empirical evidence on this question by examining firms’ earnings management decisions. Analysts may set high expectations for a firm if its peers are performing well. Failing to meet these expectations can hurt the firm’s reputation, convey unfavorable information about future prospects and increase investors’ perceived risk of the firm (Degeorge, Patel and Zeckhauser 1999; Graham, Harvey and Rajgopal 2005). Meanwhile, peers’ stock performance can have a direct impact on managerial incentives through the compensation contract.2 To avoid pay reduction or potential reputation loss, executives would try to match peers’ stock performance by strategically disclosing favorable earnings information. That is why we argue that managers have strong motivation to manage their firm’s earnings according to peer performance. Although our arguments also apply to peer firms’ accounting performance such as their profits, we focus on peer firms’ stock performance instead for three reasons. First, firms learn about their peers’ accounting performance via earnings announcements. Because firms in the same industry usually make their earnings announcements at around the same time of the quarter (Hilary and Shen 2013), they simply would not be able to manage earnings quickly enough in response to each other’s accounting performance. In contrast, peers’ returns which contain information about future earnings (e.g. Kothari and Sloan, 1992) are publicly available throughout the entire fiscal period. In addition, since peers’ performance is measured during the fiscal quarter by construction and firms usually engage in accruals management after the fiscal quarter end (Zang 2012), the measure of peer stock performance is unlikely to be affected by the firm’s future earnings management. Therefore the concern of reverse causality is mitigated.