Analysts' forecasts as an incentive for earnings management

The aim of our study is to determine, within the area of Spanish listed companies, whether analysts' forecasts constitute an incentive to manage earnings (upwards to achieve them or downwards to avoid exceeding them). Using the approach of discretionary accruals to measure earmings management, the results show that earnings forecasted by analysts constitute an incentive to manage the earnings figure upwards and that this incentive is greater as the publication of earnings approaches. However, we do not find evidence of the incentive to manage earnings downwards in order not to exceed analysts' forecasts, thereby avoiding subsequent forecasts that are more difficult to achieve.