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This study investigates the determinants and trading performance of outside directors' equity deferrals, which represent the choice to convert part or all of their annual cash compensation into deferred company stock. Using a large sample of S&P 1500 firms that allowed directors to defer their cash fees into equity between 1999 and 2009, we find significant associations between equity deferral choices and specific features of the director compensation plans, proxies for directors' outside wealth diversification, and future firm stock market performance. Trading performance analyses indicate that outside directors earn substantial abnormal returns from their deferrals, with a significant proportion of the deferral transactions occurring during blackout periods. These results are consistent with companies structuring director equity deferral plans to circumvent U.S. Securities and Exchange Commission Rule 10b-5's trading restrictions. History: Accepted by Mary E. Barth, accounting. Keywords: outside directors * deferred compensation * insider trading * SEC Rule 10b-5 plans, 1. Introduction A long line of research in accounting and finance has examined the design of executive and director compensation plans, with a particular emphasis on the choice between cash [...]

Analysts deviate from management guidance to correct for perceived earnings management. Although the A reduce forecast accuracy, they improve forecast informativeness, bringing the forecasts closer to the unmanaged earnings and reducing accruals mispricing. An implicit assumption in the literature is that more accurate analyst forecasts (i.e., estimates that are closer to the reported earnings) are better for investors, and that analysts' objective is to forecast the reported (managed) earnings accurately. Our analysis suggests that this is not necessarily the case and that an inaccurate forecast can actually be more informative than an accurate one. Prior studies on analysts' deviations from management guidance focus on analysts' incentives to issue estimates that managers can beat. These studies implicitly assume that analysts side with management against the interests of their clients. Our analysis indicates that analysts could also deviate from management guidance to provide useful valuation information to their clients. Key words: analyst forecasts; forecast accuracy; forecast informativeness; management forecasts; earnings management History: Received September 30, 2011; accepted September 15, 2012, by Mary Barth, accounting. Published online in Articles in Advance January 15, 2013., 1. Introduction Managers are often alleged to manage their reported earnings, sometimes with the intent to mislead investors. If managers forecast and report misleading earnings numbers and analysts deviate from [...]