Managing earnings surprises in the US versus 12 other countries

We compare the distribution of earnings surprises in the US to those of 12 other countries. We expect US managers to be relatively more likely to manage earnings surprises due to differences in US corporate governance and legal environments versus those in other countries. An increasing emphasis on stock price performance in the US, as reflected by the rapid increase in stock and options compensation to US managers, and increases in litigation upon stock price drops, leads us to expect the tendency of US managers to manage earnings surprises versus those of non-US managers has increased in recent years. Our evidence is consistent with our expectations. We discuss the implications of our findings for public policies to address the earnings surprise game.