Impact of Adoption of Long-Term Performance Plans on Financial Analysts' Long-Term Forecasts

Impact of Adoption of Long-Term Performance Plans on Financial Analysts' Long-Term Forecasts Prior research demonstrates that firms adopting long-term performance plans experience increased capital investment, earnings, and risk in the post-adoption period. However, these results are subject to distortions that may result from exogenous factors over the long time period examined. To avoid these potential distortions we examine financial analysts' forecasts in the periods immediately preceding and following the adoption of the performance plan. We find that projected long-term capital expenditures per share, earnings per share and cash flow per share are revised upward in the post-adoption period. These results are consistent with the premise that the adoption of long-term performance plans is expected to favorably affect managers' decisions. In addition, we find that the revisions are primarily attributable to firms that were performing poorly in the period prior to plan adoption and in greatest need of change. This finding has not been documented in previous studies. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

Impact of Adoption of Long-Term Performance Plans on Financial Analysts' Long-Term Forecasts

Loading next page...
 
/lp/springer_journal/impact-of-adoption-of-long-term-performance-plans-on-financial-pEnaURRxk1
Publisher
Kluwer Academic Publishers
Copyright
Copyright © 2002 by Kluwer Academic Publishers
Subject
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
D.O.I.
10.1023/A:1020771625686
Publisher site
See Article on Publisher Site

Abstract

Prior research demonstrates that firms adopting long-term performance plans experience increased capital investment, earnings, and risk in the post-adoption period. However, these results are subject to distortions that may result from exogenous factors over the long time period examined. To avoid these potential distortions we examine financial analysts' forecasts in the periods immediately preceding and following the adoption of the performance plan. We find that projected long-term capital expenditures per share, earnings per share and cash flow per share are revised upward in the post-adoption period. These results are consistent with the premise that the adoption of long-term performance plans is expected to favorably affect managers' decisions. In addition, we find that the revisions are primarily attributable to firms that were performing poorly in the period prior to plan adoption and in greatest need of change. This finding has not been documented in previous studies.

Journal

Review of Quantitative Finance and AccountingSpringer Journals

Published: Oct 13, 2004

References

You’re reading a free preview. Subscribe to read the entire article.


DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Search

Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly

Organize

Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.

Access

Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

DeepDyve

Freelancer

DeepDyve

Pro

Price

FREE

$49/month
$360/year

Save searches from
Google Scholar,
PubMed

Create lists to
organize your research

Export lists, citations

Read DeepDyve articles

Abstract access only

Unlimited access to over
18 million full-text articles

Print

20 pages / month

PDF Discount

20% off