Firms’ real activities management (RAM) can have a more detrimental effect on firms’ future performance than accrual earnings management. This paper aims to examine whether analysts, who play an important role as information intermediaries, understand the negative effect of RAM on firms’ future performance and respond to it accordingly.,The authors investigate whether analysts lower their earnings forecasts and stock recommendations of the firms with RAM. The authors measure RAM by examining firms’ abnormal decreases in discretionary expenses, abnormal increases in production and abnormal decreases in cash flow from operations following prior literature.,The authors find that after controlling for earnings surprises and other important firm characteristics, analysts lower their forecasts of future annual earnings and stock recommendations of the firms that show signs of RAM.,First, as in other RAM studies, the results in this study are subject to measurement errors inherent in the estimation of RAM (i.e. abnormal production costs, abnormal CFO and abnormal discretionary expenditures). Second, we include only firm-year observations that barely make positive income in our samples following the previous study. This sample selection criterion helps increase the power of the test by examining the “suspect firms group,” which are more likely to engage in earnings management. However, one can challenge that our findings on the association between RAM and analysts’ reactions could be only case-specific and cannot be generalized.,This study contributes to the literature on earnings management and especially on RAM. Specifically, none of the previous studies clearly examines whether analysts understand the negative impact of RAM on firms’ future performance and respond accordingly, although there are studies showing the negative association between RAM and firms’ future operating performance and studies showing the negative association between analysts following and RAM. Thus, filling the gap, this study provides a specific reason for the negative association between the analyst following and real earnings management presented in previous studies.,The findings will be of interest to regulators, who are concerned about the potential negative consequences in which tighter accounting standards can result. For example, Ewert and Wagenhofer (2005) theoretically demonstrate that tighter accounting standards can prompt more RAM instead of accounting earnings management. The study provides important evidence supporting that such suboptimal operating activities are closely watched by analysts and are potentially penalized by the market. If the market is able to detect RAM and allocate fewer resources to the firms that engage in it, then the concerns associated with the substitution effect between accrual-based earnings management and RAM can be diminished.,Prior research suggests that tighter accounting regulations (e.g. the Sarbanes-Oxley Act) prompt more RAM than accounting earnings management. The study provides evidence supporting that such suboptimal operating activities are closely watched by analysts and are potentially penalized by the market.

中文翻译：

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分析师对公司实际活动管理的反应

与应计收益管理相比，企业的真实活动管理（RAM）对企业的未来绩效可能产生更大的不利影响。本文旨在研究在信息中介机构中扮演重要角色的分析师是否了解RAM对企业未来绩效的负面影响并做出相应的反应。作者调查了分析师是否降低了企业的盈利预测和股票推荐与RAM。作者根据先前的文献研究了企业的可自由支配费用的异常减少，生产的异常增加和运营现金流量的异常减少来衡量RAM。作者发现，在控制了收益意外和其他重要的企业特征之后，分析师降低了其对出现RAM迹象的公司的未来年度收益和股票推荐的预测。首先，与其他RAM研究一样，本研究的结果受到RAM估计中固有的测量误差（即异常生产成本）的影响。 ，异常的CFO和异常的可支配支出）。其次，在先前的研究之后，我们仅在样本中仅包含几乎未带来正收入的企业年观察结果。该样本选择标准通过检查“可疑公司集团”来帮助提高测试的能力，“可疑公司集团”更可能参与收益管理。但是，有人可能会质疑我们关于RAM与分析师反应之间联系的发现可能仅针对特定案例，不能一概而论。这项研究为有关盈余管理（尤其是RAM）的文献做出了贡献。具体而言，尽管有研究表明RAM和企业未来经营绩效之间存在负相关关系，而研究表明分析师之间存在负相关关系，但先前的研究均未明确检验分析师是否了解RAM对公司未来绩效的负面影响并做出相应回应以下和RAM。因此，为填补这一空白，本研究提供了分析师关注度与先前研究中提出的实际盈余管理之间负相关的具体原因。监管机构对这一发现感兴趣，他们担心潜在的负面后果会导致收紧。会产生会计标准。例如，Ewert和Wagenhofer（2005）从理论上证明，更严格的会计标准可以促进更多的RAM，而不是会计收入管理。这项研究提供了重要的证据，支持这种次优的经营活动受到分析师的密切关注，并可能受到市场的惩罚。如果市场能够检测RAM并将较少的资源分配给从事该业务的公司，那么与基于权责发生制的收益管理和RAM之间的替代效应相关的担忧就可以减少。，先前的研究表明，收紧会计法规（例如萨班斯法案（Sarbanes-Oxley Act）带来了比会计收益管理更多的RAM。这项研究提供了证据，证明这种次优的经营活动受到分析师的密切关注，并有可能受到市场的惩罚。