Earnings management to achieve positive earnings surprises in case of medium size companies listed in Poland

Earnings management in Polish listed companies was the subject of only several studies, mainly theoretical, but none of them is related to earnings management to meet analysts’ expectations. The aim of the paper is to detect any signals of earnings management to achieve zero or small positive earnings surprises. The sample comprises 609 observations from years 2012-2014 related to medium size companies listed at Warsaw Stock Exchange. Distribution of scaled annual earnings surprise (difference between realized and forecasted earnings scaled by beginning total assets) is analyzed. It contains unusually high frequency of small positive surprises. If the module of earnings surprise is small it is more probable that the real value was higher than the forecast - meeting or beating the forecast, so small positive earnings surprises are more probable than negative. If the module of earnings surprise is high it is more probable that the forecast of income was higher than the real value - neither meeting nor beating the forecast. Results are not sensitive to the choice of earnings surprise metric.