Search results

This study examines the investment horizon influence, mediated by market optimism, on earnings management based on accruals and real activities. Based on short-termism, the authors argue that earnings management increases in optimistic periods to boost corporate profits.

The authors analyzed non-financial Brazilian publicly traded firms from 2010 to 2020 by estimating industry-fixed effects of groups of short- and long-horizon firms to compare their behavior on earnings management practices during bullish moments. For robustness, the authors used alternate measures and trade-off analyses between earning management practices.

The findings indicate that, during bullish moments, companies prioritize managing their earnings through real activities management (RAM) rather than accruals earnings management (AEM), depending on their time horizon. The results demonstrate the trade-off between earnings management practices.

This study presents limitations when using proxies for earnings management and investor sentiment.

Investors and regulators should closely monitor companies' operations, especially during bullish market conditions to prevent fraud.

The study addresses investor sentiment mediation in the earnings management discussion, introducing the short-termism approach.

This article analyzes the hypothesis that analysts issue higher long-term earnings growth (LTG) forecasts following a market-wide investor sentiment.

This study analyzed 193 publicly traded Brazilian firms listed on B3 (Brasil, Bolsa, Balcão), totaling 2,291 observations. To address the potential selection bias resulting from analysts' preference for more liquid firms, this study used the Heckman model in the analysis with samples with only one analyst and the entire sample. The study also applied other robustness tests to ensure the reliability of the findings.

The results suggest that market-wide investor sentiment influences LTG when the firm's stocks are difficult to value. Market optimism did not reflect five-year profit growth after the forecast issue, suggesting lower forecast accuracy during high investor sentiment values.

Volatile-earnings firms have relevant implications in LTG forecasts during bullish moments. According to the study’s evidence, investors' decisions and policymakers' and regulators' rules should consider analysts' expertise as independent information when considering LTG as input for valuation models, even under market optimism.

This paper contributes to the literature on the influence of investor sentiment on analysts' forecasts by incorporating two crucial elements in the discussion: the scenario free from herding behavior, as usually only one analyst issues LGT forecast for Brazilian firms, and the analysis of research hypotheses incorporates the difficulty of pricing a firm given the uncertainty of its earnings as an explanation to bullish forecast.

This study aims to examine the listing of firms at the highest corporate governance level of the Brazilian stock exchange (B3) as a means of legitimation and its relationship with risk and return on investment.

This paper analyzes 205 companies from 2010 to 2019, in which firms listed at the Novo Mercado level were compared with groups composed of other firms traded on B3.

The main results demonstrate that a listing at the supposedly higher level of corporate governance in Brazil does not indicate lower risk, a higher return or even a better risk-return ratio.

The findings are restricted to this sample, representing the association identified between the analyzed phenomena and not a cause-effect relationship.

The highest level of corporate governance in Brazil brings together firms that present a higher risk (at least systematic) and lower returns (at least financial) because they seek to legitimize themselves in the market as firms committed to better management practices.

These findings are useful to investors, the stock exchange, regulatory agents and the companies themselves to reflect on the purpose and usefulness of different levels of corporate governance in Brazil.

This study differs from the others that relate corporate governance to risk or return because it does not deal individually with corporate governance practices, but rather the phenomenon that is listed in a special governance level, created by the stock exchange, serving as a kind of seal legitimation.