In their survey, the authors find that managers consider earnings management to be relatively immoral. Still, managers face pressures that may incentivize them to engage in earnings management. Figure 2 shows that stakeholders whose earnings expectations managers are most concerned about meeting are shareholders. Explain why

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Managers appear to be most concerned about the expectations of shareholders and regulators. Yet they also appear to be concerned about failing to meet the earnings expectations of various other parties, specifically coworkers, friends, family, and others outside the company, such as creditors and the general public. These results suggest that managers may be sensitive to the perceptions of a larger body of stakeholders than previously expected.

FIGURE 2: STAKEHOLDERS WHOSE EARNINGS EXPECTATIONS MANAGERS ARE MOST CONCERNED ABOUT MEETING (N = 73 FINANCIAL REPORTING MANAGERS) Friends and family, 6% Others within company, 15% Shareholders, 42% Others outside company, 16% Securities & Exchange Commission (SEC), 21%