Investor Sentiment and Earnings Management: Evidence on the use of discretionary accruals to meet earnings benchmarks


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This work investigates whether investor sentiment influences earnings management, specifically on using discretionary accruals to meet earnings benchmarks. The sample includes all non-financial firms listed on B3 (Bolsa, Brasil, Balcão) between 2010 and 2017. We use a GMM (Generalized Method of Moments) panel estimation to analyze the general relationship between investor sentiment and earnings management, and a logistic regression to analyze whether high sentiment increases the likelihood of management occurring in specific cases. As a result, it was not possible to conclude that investor sentiment influences the general use of earnings management. However, there was a higher probability of using earnings management to outperform the previous period’s earnings when the sentiment was pessimistic. Our results are robust to alternative periodicities for the sentiment index and different ways of discretionary accruals estimation.

Keyword : Behavioral Finance, Investor Sentiment, Earnings Management, Earnings Benchmarks Finanças Comportamentais, Sentimento do Investidor, Gerenciamento de Resultados, Benchmarks de Lucros

How to Cite
Vieira, C. A. M., Xavier, G. C., & Lucena, W. G. L. (2023). Investor Sentiment and Earnings Management: Evidence on the use of discretionary accruals to meet earnings benchmarks. Brazilian Business Review, 21(2).


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