Gaming the Float: How Managers Respond to EPS-based Incentives

Table 4: Shares Outstanding: First Differences and IV
This table presents IV regression models of changes in shares outstanding as a function of changes in firm characteristics. Net Income
Forecast Error Volatility - Analyst is instrumented for using exogenous changes in analyst coverage. Shares outstanding is measured as
the total number of shares outstanding (1000’s) from CRSP at the end of the quarter. Net Income Forecast Error Volatility - Analyst
is the standard deviation of the the difference between actual earnings and median IBES forecast of earnings. Market to Book is total
market equity plus the book value of total debt divided by total assets. Net Income is from Compustat at quarter end. Market Cap is
the total market capitalization in millions at the quarter end. Institutional ownership is percent ownership of all institutions. Return
Volatility is the standard deviation of daily stock returns over the prior 90 days. Annual Return is the past 12 month stock return.
The Amihud measure of illiquidity calculated over the previous 90 days.
(1) (2)
∆ Shares ∆ Shares
VARIABLES Outstanding Outstanding
∆ Net Income Volatility - Analyst Forecast t−1 0.53*** 0.58**
(0.17) (0.26)
∆ Market to Book t−1 0.03*** 0.02
(0.01) (0.01)
∆ Net Income t−1 0.03*** 0.04**
(0.01) (0.02)
∆ Institutional Ownership t−1 0.15*** 0.20***
(0.00) (0.01)
∆ Market Cap t−1 0.08*** 0.08***
(0.01) (0.01)
∆ Annual Return t−1 0.01 0.01
(0.01) (0.02)
∆ Amihud t−1 -0.02*** -0.03
(0.00) (0.05)
∆ Return Volatility t−1 0.02*** 0.04***
(0.00) (0.01)
∆ Incentive Comp t−1 0.01**
(0.00)
Constant 0.02 -0.14***
(0.02) (0.03)
Year Effects Y Y
Observations 246,077 105,571
R-squared 0.04 0.04
Standard errors clustered by firm in parentheses
*** p