This paper tests a revenue catering theory under which investors have time-varying demand for revenue growth and managers will cater to this demand by delivering higher revenue when investors place a higher premium on revenue. I document the time-series variation in the "revenue surprise premium" - a proxy for investor demand for revenue growth, where the "revenue surprise premium" is measured as the earnings announcement period stock return response to good news in revenue after controlling for news in earnings. I investigate whether managers cater to the time-varying "revenue surprise premium" by meeting or beating market expectations of revenue. I find evidence consistent with revenue catering behavior. Firms are more likely to meet or beat analyst forecasts of revenue when the previous quarter's revenue surprise premium is high. I also find evidence that firms use aggressive revenue recognition practices when catering to investors. The results are most pronounced among firms in high-tech and health sectors whose revenue surprise premiums are higher relative to other sectors.

This thesis examines the extent to which benchmark beating by Australian firms around the earnings level and earnings changes thresholds can be reliably interpreted as evidence of earnings management. A number of recent academic papers challenge the earnings management explanation for the observed kinks in the distribution of net Income. In response to this criticisms, this thesis is motivated to conduct tests of earnings management with a refined methodology of selecting a subset of firms immediately above the threshold that have a priori incentives to achieve the benchmark. This approach allows for investigations to focus on benchmark beating observations where earnings manipulations would be more prevalent and thereby provide a powerful test for the existence of opportunistic reporting. The paper uses a number of unexpected accruals measures including the Kothari et al. (2005) performance matched models. In testing the hypotheses, this thesis utilises two approaches which were; the regression approach and the test of difference of means approach. Based on a broad sample drawn from all listed Australian firms for the years 1995-2007, small profit firms and small increase firms with high price-to-sales ratio were found to have evidence consistent with opportunistic benchmark beating behaviour. Similar results are also documented for benchmark beating firms with low book-to-market (high market-to-book) ratio. This thesis also finds that firms with equity offering incentives who reported improvement in earnings display unexpected accruals consistent with earnings management. In addition, the accounting behaviour of firms which previously incurred a loss is consistent with earnings management explanation. Firms with long strings of earnings increases also appear to use accounting discretion in order to avoid earnings deterioration. Similarly, evidence of earnings management are also displayed by small profit firms which have consistently reported negative earnings. Finally, this thesis provides evidence that resolves the apparent paradox that benchmark beating is evidence of earnings management which is devoid of the statistical artefact argument posited by Durtschi and Easton (2005) and Durtschi and Easton (2008).