The Role of Supplementary Statements with Management Earnings Forecasts

The Role of Supplementary Statements with Management Earnings Forecasts ABSTRACT We investigate managers' decisions to supplement their firms' management earnings forecasts. We classify these supplementary disclosures as qualitative “soft talk” disclosures or verifiable forward‐looking statements. We find that managers provide soft talk disclosures with similar frequency for good and bad news forecasts but are more likely to supplement good news forecasts with verifiable forward‐looking statements. We examine the market response to these forecasts and find that bad news earnings forecasts are always informative but that good news forecasts are informative only when supplemented by verifiable forward‐looking statements, supporting our argument that these statements bolster the credibility of good news forecasts. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Accounting Research Wiley

The Role of Supplementary Statements with Management Earnings Forecasts

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Publisher
Wiley
Copyright
Copyright © 2003 Wiley Subscription Services, Inc., A Wiley Company
ISSN
0021-8456
eISSN
1475-679X
D.O.I.
10.1046/j.1475-679X.2003.00126.x
Publisher site
See Article on Publisher Site

Abstract

ABSTRACT We investigate managers' decisions to supplement their firms' management earnings forecasts. We classify these supplementary disclosures as qualitative “soft talk” disclosures or verifiable forward‐looking statements. We find that managers provide soft talk disclosures with similar frequency for good and bad news forecasts but are more likely to supplement good news forecasts with verifiable forward‐looking statements. We examine the market response to these forecasts and find that bad news earnings forecasts are always informative but that good news forecasts are informative only when supplemented by verifiable forward‐looking statements, supporting our argument that these statements bolster the credibility of good news forecasts.

Journal

Journal of Accounting ResearchWiley

Published: Dec 1, 2003

References

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