An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Vasiliki E. Athanasakou
Manchester Business School

Norman C Strong
Manchester Business School

Martin Walker
Manchester Business School

Abstract: We examine whether UK firms use their discretion over reporting a customized EPS to meet or beat analyst expectations (MBE). After establishing that UK firms customize EPS by making informative adjustments to net income for transitory items, we show that the use of income-increasing adjustments for operating exceptional and other non-recurring items increases the probability of MBE. Firms that MBE with alternative EPS have future inflows per pence of alternative EPS that are significantly higher than for firms that miss the target, and similar to firms meeting expectations with net income.

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