Consistency in meeting or beating earnings expectations and management earnings forecasts

Consistency in meeting or beating earnings expectations and management earnings forecasts This paper provides evidence that firms that have consistently met or beaten analysts’ earnings expectations ( MBE ) provide more frequent “bad news” management forecasts than firms with no established string of MBE , particularly when existing analyst forecasts are optimistic. This suggests that firms with a consistent MBE record are more likely to guide analysts’ expectations downward to avoid breaking the consistency. Subsequent analyst forecast revisions following bad news management forecasts issued by these firms are dampened, implying that analysts suspect that these forecasts may be opportunistic. The relation between management forecasts and MBE consistency is stronger after Regulation FD. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Accounting and Economics Elsevier

Consistency in meeting or beating earnings expectations and management earnings forecasts

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Publisher
Elsevier
Copyright
Copyright © 2010 Elsevier B.V.
ISSN
0165-4101
D.O.I.
10.1016/j.jacceco.2010.06.004
Publisher site
See Article on Publisher Site

Abstract

This paper provides evidence that firms that have consistently met or beaten analysts’ earnings expectations ( MBE ) provide more frequent “bad news” management forecasts than firms with no established string of MBE , particularly when existing analyst forecasts are optimistic. This suggests that firms with a consistent MBE record are more likely to guide analysts’ expectations downward to avoid breaking the consistency. Subsequent analyst forecast revisions following bad news management forecasts issued by these firms are dampened, implying that analysts suspect that these forecasts may be opportunistic. The relation between management forecasts and MBE consistency is stronger after Regulation FD.

Journal

Journal of Accounting and EconomicsElsevier

Published: Feb 1, 2011

References

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