산업 내 선도기업의 선(先)공시이익이 후(後)공시기업의 결산일 이후 이익조정 및 시장반응에 미치는 영향

Corporate manager has an incentive to meet or beat earnings thresholds and is willing to manage earnings to achieve target earnings. The investor’s expectation on firm performance can be affected by another firm’s performance. If the investor revises expected earnings of a target firm based on another firm’s earnings news within the same industry, the manager’s incentive to manage earnings is also likely to be affected by another firm’s performance. Especially, early announced earnings performance of a leading firm in the industry may be useful for the investor to analyze industry trends and to revise expectation of target firm that have not yet announced. In this study, we focus the effect of a leading firm’s (“early announcing firm”) earnings performance on management and investor behavior of the firm (“late announcing firm”) in the same industry and investigate two research questions. First, we examine the association between one firm’s financial reporting behavior, specifically, discretionary earnings management, and other firm’s early reported earnings. Second, we examine the association between market response to one firm’s earnings announcement and other firm’s early reported earnings. When early announcer meets or beats earning target, managers of late announcers have incentives to engage in upward earnings management in response to increased earnings pressure from market participants. On the other hands, when early announcer fails to meet earnings target, managers of late announcers may expect a lower market penalty for bad news. In this case, managers of late announcers are likely to reduce the extent of upward accruals or to reserve accruals to a future period. Based on this reasoning, we examine late announcer’s earnings management behavior after fiscal year-end and stock market participant’s expectation revise in response to leading firms’ early reported earnings. We use listed firms with analyst forecasts for the period from 2007 to 2012 to test our research questions. Based on Bratten et al.(2013), early announcing firm is defined as the first firm to report earnings and in the first quartile of market capitalization within each industry. Late announcing firm is defined as the firm that reports earnings at least five days subsequent to early announcer’s earnings announcement. We use consensus of analysts’ earnings forecasts as earnings threshold. The sample consists of 82 early announcing firm-year observations and 1,825 late announcing firm-year observations. We find that early announcer’s reported earnings affect late announcer’s earnings management behavior after fiscal year-end. Specifically, late announcing firm is more likely to report higher discretionary accruals in response to increased earnings pressures when early announcing firm reports earnings that meet or beat analyst forecasts. However, there is no significant relation between late announcer’s tax expense management and early announcer’s reported earnings. These results imply that late announcing firm is more likely to engage in upward after-tax earnings management by reporting higher pre-tax discretionary accruals rather than lowering tax expense. We also find that stock market response to late announcing firm’s unexpected earnings is weaker(stronger) when early announcing firm’s reported earnings beat(miss) analyst forecasts. These results indicate that investors may expect good news of target firm when early announcing leading firm reports good news, therefore market premium(penalty) for positive(negative) earnings surprise of the target firm decreases(increases). These results give an empirical evidence for prior research’s assumption that investor evaluates future performance of the target firm on a relative basis. This study extends the prior literature on the determinants of earnings management and information transfer within the industry by providing evidence that early reported earnings of the leading firm within the industry affect financial reporting behaviors of managers and earnings expectations of investors. Our study has an implication to external auditors and investors by showing empirical evidence for information effect of reported earnings of the leading firm in the industry.