Analysts and earnings management - A sensemaking perspective

Abstract: This thesis examines how analysts make sense of earnings management, a topic which previous research has largely neglected. To examine this subject, we have conducted a qualitative single-case study based on semi-structured interviews with nine analysts. We use sensemaking and sensegiving as our theoretical framework to analyze the empirical findings. With the use of these concepts, we find that while analysts do not deliberately make sense of earnings management, there is an indirect sensemaking of earnings management. This is due to analysts' aim of deriving the earnings quality. To derive the earnings quality, analysts make adjustments to certain items. The adjustments aimed at deriving earnings quality are found to also adjust for earnings management.