Earnings Expectations and the Quality of Financial Services

Xiaomeng Shi; Duc Duy Nguyen; Mingzhu Wang

doi:10.1016/j.jaccpubpol.2023.107115

Earnings Expectations and the Quality of Financial Services

Xiaomeng Shi, Duc Duy Nguyen, Mingzhu Wang

Accounting & Financial Management

Research output: Contribution to journal › Article › peer-review

1 Citation (Scopus)

Abstract

Using complaint data filed by consumers with the Consumer Financial Protection Bureau against financial institutions, we show that banks receive, on average, 13.3% more customer complaints in the quarter immediately after they narrowly beat analysts’ earnings forecasts. The effect is mainly driven by banks’ attempts to reduce their non-interest expenses to beat earnings benchmarks. The relationship is stronger when bank CEOs receive a greater proportion of incentive-based compensation. Overall, our paper demonstrates how capital market incentives exacerbate shareholder–customer conflicts.

Original language	English
Article number	107115
Journal	JOURNAL OF ACCOUNTING AND PUBLIC POLICY
Volume	42
Issue number	4
DOIs	https://doi.org/10.1016/j.jaccpubpol.2023.107115
Publication status	E-pub ahead of print - 13 Jul 2023

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10.1016/j.jaccpubpol.2023.107115Licence: CC BY

Cite this

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title = "Earnings Expectations and the Quality of Financial Services",

abstract = "Using complaint data filed by consumers with the Consumer Financial Protection Bureau against financial institutions, we show that banks receive, on average, 13.3% more customer complaints in the quarter immediately after they narrowly beat analysts{\textquoteright} earnings forecasts. The effect is mainly driven by banks{\textquoteright} attempts to reduce their non-interest expenses to beat earnings benchmarks. The relationship is stronger when bank CEOs receive a greater proportion of incentive-based compensation. Overall, our paper demonstrates how capital market incentives exacerbate shareholder–customer conflicts.",

author = "Xiaomeng Shi and Nguyen, {Duc Duy} and Mingzhu Wang",

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AB - Using complaint data filed by consumers with the Consumer Financial Protection Bureau against financial institutions, we show that banks receive, on average, 13.3% more customer complaints in the quarter immediately after they narrowly beat analysts’ earnings forecasts. The effect is mainly driven by banks’ attempts to reduce their non-interest expenses to beat earnings benchmarks. The relationship is stronger when bank CEOs receive a greater proportion of incentive-based compensation. Overall, our paper demonstrates how capital market incentives exacerbate shareholder–customer conflicts.

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Earnings Expectations and the Quality of Financial Services

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