Investor Sentiment and Earnings Management: Does Analysts’ Monitoring Matter?

Miranda, Kléber Formiga; Machado, Márcio André Veras; Macedo, Luciana Alencar Firmo

doi:10.1590/1678-6971/eramf180104

Cited by 10 publications

(7 citation statements)

References 51 publications

(83 reference statements)

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“…Previous studies suggest that EM practices increase during optimistic moments, yet firms monitored by analysts are more prone to restrain this behaviour. Our findings aligns with Miranda et al (2018); Yu (2008), who also find greater analysts following to constrain EM activity yet is at odds with Enomoto et al (2015)'s mixed market study where a similarly significant relationship was not found.…”

Section: Robustness Checkssupporting

confidence: 80%

Earnings Management in Frontier Market: Do Institutional Settings Matter?

2021

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We analyse whether differences in earnings management practices in frontier countries can be explained by institutional settings, considering their diverse corporate governance environments, legal regimes, and accounting standards. Across 22 frontier market countries from 2000–2017, we find that financial disclosure, legal environments, and the number of analysts following to be correlated with reduced levels of earnings management (EM). The impact of wealth, GDP growth, firm size, and the use of Big-4 auditors were also associated with reduced EM. Contrary to developed markets and novel to this study, higher levels of societal trust failed to show significance in its ability to constrain EM, suggesting informal institutions are less influential as control monitors. Findings herein verify that the factors that moderate EM are not universally applicable, and help highlight international differences in the management of earnings.

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Section: Robustness Checkssupporting

confidence: 80%

Earnings Management in Frontier Market: Do Institutional Settings Matter?

2021

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“…Studies investigating investor sentiment in Brazil have sought to analyze its impact considering different aspects, such as its relationship with the trading volume (Marschner & Ceretta, 2019) and with market anomalies (Xavier & Machado, 2017), as well as its impact on accounting aspects such as earnings management, considering the moderating role of analysts (Miranda, Machado, & Macedo, 2018), and accruals quality (Santana, Santos, Carvalho, & Martinez, 2020). The results confirm that investor sentiment influences accounting aspects and the market phenomena in Brazil, as can be observed in more developed countries.…”

Section: Previous Studies and Research Hypothesismentioning

confidence: 99%

Asymmetric Impact of Investor Sentiment on Brazilian Stock Market Volatility

Ferreira

Machado

Silva

2021

RAM, Rev. Adm. Mackenzie

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Purpose: The purpose of this study was to analyze the effect of investor sentiment on the volatility of the Brazilian stock market. Specifically, it aimed to identify if the asymmetric behavior of sentiment could be observed in emerging markets, considering companies that have characteristics that are difficult to price. Originality/value: Unlike most studies on investor sentiment, this study focuses on its impact on the stock market volatility, as well as on the characteristics of companies associated with difficult pricing. Design/methodology/approach: The volatility of the IBRX100 index was used to represent the Brazilian stock market, and as a proxy for investor sentiment it was selected Miranda's index (2018), based on market data. Data were estimated using the two-stage least squares (MQ2E) technique to address endogeneity problems. Finally, the volatility of companies with difficult-to-price characteristics was segregated to analyze their sensitivity to sentiment. Findings: The results indicate that sentiment has a negative and sig nificant relationship with the volatility of the Brazilian market, as well as evidences an asymmetrical behavior, being statistically stronger in pessimistic periods. Additional analyzes evidence that the explanatory sentiment capacity is sensitive to companies' characteristics, but only companies with a high book-to-market ratio showed asymmetric behavior, as expected by the literature. The portfolios segmented by size and illiquidity maintained an asymmetric behavior, but it was the volatility of the large companies and the less illiquid ones that were best explained by sentiment, indicating that the Brazilian market has distinctive characteristics in relation to developed markets.

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“…Because it is relatively better specified and parsimonious, the model of Pae (2005) has been extensively used by many studies conducted with data of companies listed in the Brazilian stock market (e.g., Almeida & Bezerra, 2012; Formigoni et al., 2009; Lima et al., 2015; Martins et al., 2019; Miranda et al., 2018; Paulo et al., 2012; Paulo & Mota, 2019), whose results have shown good estimates. The model of Pae (2005) is presented by Equation (2).…”

Section: Research Desingmentioning

confidence: 99%

Accruals mispricing versus risk: Analyzing the influence of external monitoring in Brazil

Martins

Machado

Monte

2021

Financ Manag Account

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In this paper, we examine the role of external monitoring as an alternative mechanism of corporate governance pertaining to the risk and mispricing of accruals in the Brazilian market. The results provide evidence of the accruals anomaly for companies with low external monitoring and evidence that is stronger when evaluating the discretionary component of accruals. Our analysis does not support the conclusion that total and discretionary accruals represent price risk factors, which suggests that the evidence of anomaly results from mispricing. Our evidence contributes to the growing literature on accruals pricing in emerging markets, by adding elements such as the influence of external monitoring and the level of investor sophistication, hereby represented by market analysts and institutional investors. Our study provides additional evidence that the presence of these intermediary agents creates an external layer of control capable of contributing positively to the process of disclosure and pricing of financial information. Thus, the role of such intermediaries as external monitors in emerging markets can be potentially significant for correctly pricing accruals. While Brazil has its own unique institutional characteristics, our findings confirm the evidence obtained for other countries.

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Investor Sentiment and Earnings Management: Does Analysts’ Monitoring Matter?

Cited by 10 publications

References 51 publications

Earnings Management in Frontier Market: Do Institutional Settings Matter?

Earnings Management in Frontier Market: Do Institutional Settings Matter?

Asymmetric Impact of Investor Sentiment on Brazilian Stock Market Volatility

Accruals mispricing versus risk: Analyzing the influence of external monitoring in Brazil

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