Natural Disasters and Meeting‐or‐Beating Earnings Benchmarks

ABSTRACT We hypothesise and find evidence that when natural disasters occur, managers are motivated to meet or beat the dynamic earnings benchmark (i.e., analyst earnings forecast) but not the static earnings benchmarks (i.e., zero or last year's earnings). Further analyses show that managers meet or beat the dynamic earnings benchmark through non‐GAAP exclusion and expectation management. This study extends the earnings benchmark literature by providing evidence that managers may take advantage of natural disasters to make opportunistic accounting choices.