| This study provides empirical evidence on whether there is an association between corporate governance mechanisms and meeting or beating analysts' expectations. In the short run, the market may reward managers for meeting or beating analysts' expectations, but this may be detrimental to long run shareholder value to the extent that meeting or beating analysts' expectations is achieved purely through earnings management. Consistent with the premise that firms with strong corporate governance mechanisms emphasize long run shareholder value, I find a negative association between the strength of corporate governance and the propensity of firms to meet or beat analysts' expectations. In addition, I find that while firms with weak corporate governance mechanisms use earnings management to meet or beat analysts' expectations, firms with strong corporate governance mechanisms achieve the same result by guiding analysts' expectations. |
