{'fraction_non_alphanumeric': 0.008537886872998933, 'fraction_numerical': 0.0, 'mean_word_length': 5.897058823529412, 'pattern_counts': {'":': 0, '<': 0, '<?xml version=': 0, '>': 0, 'https://': 0, 'lorem ipsum': 0, 'www.': 0, 'xml': 0}, 'pii_count': 0, 'substrings_counts': 0, 'word_list_counts': {'cursed_substrings.json': 0, 'profanity_word_list.json': 0, 'sexual_word_list.json': 0, 'zh_pornsignals.json': 0}}
Investor Reaction to Higher Earnings Management Incentives of Overoptimistic CEOs

We examine whether investors recognize and rationally impound into the share price the possible earnings management of overoptimistic CEOs at the time the management forecast is issued, rather than the perceived (actual) earnings management at the announcement of realized earnings. We first confirm that investors underreact to management earnings forecasts issued by overoptimistic managers. Next we find that the market reacts more positively to the earnings announcements of overoptimistic CEOs when realized earnings are slightly above or below forecasted earnings compared to those of non-optimistic managers. This confirms our expectations that investors react negatively to the higher earnings management incentives of overoptimistic managers when the forecast is issued and not to actual signs of earnings management when earnings are announced.