Description:
<jats:title>Abstract</jats:title><jats:p>We examine if quarterly earnings guidance induces real earnings management. Quarterly guidance may cause myopia and inefficient decision‐making, if managers become overly concerned with setting and beating short‐term earnings targets. We test these associations on a large sample of US firms. Our evidence suggests that quarterly guidance is informative and lowers myopic incentives. However, our analyses also reveal endogenous associations exist between guidance and real earnings management. In contrast with existing concerns over frequent guiders, we find that guidance appears problematic in infrequent guiders, and in firms that issue good news earnings guidance and that operate in settings where earnings pressures are high.</jats:p>