The Impact of Management Earnings Forecasts on Firm Risk and Firm Value

2008 ◽  
Author(s):  
Stephen R. Foerster ◽  
Stephen Sapp ◽  
Yaqi Shi
Keyword(s):  
Firm Value ◽  
Earnings Forecasts ◽  
Management Earnings Forecasts ◽  
Firm Risk ◽  
The Impact

Does customer satisfaction matter to managers’ earnings forecasts and stock returns?

2018 ◽  
Vol 52 (9/10) ◽  
pp. 2026-2051 ◽  
Author(s):  
Jenny (Jiyeon) Lee ◽  
Youngdeok Lim ◽  
Hyung Il Oh
Keyword(s):  
Customer Satisfaction ◽  
Stock Returns ◽  
Firm Value ◽  
Earnings Forecasts ◽  
Management Forecasts ◽  
Management Earnings Forecasts ◽  
Marketing Metrics ◽  
Content Type ◽  
Study Results ◽  
The Impact

PurposeThe purpose of this study is to examine the relevance of American Customer Satisfaction Index (ACSI) to management voluntary forecasts of earnings. The authors further investigate whether the market reacts to such forecasts in respect of satisfaction.Design/methodology/approachThe authors’ econometric models are constructed from previous work in accounting to specify the effect of ACSI on the issuance and optimism of management forecasts. Our model also specifies the impact of management optimism with respect to ACSI on stock returns. The data consisting of US firms in the 2001-2010 is collated from several databases and analyzed using multiple regression procedures.FindingsResults indicate that ACSI is positively associated with the likelihood of issuing management forecasts and boosts management optimism. It is also found that investors react negatively to management optimism that is inherent in forecasts and results from satisfaction.Research limitations/implicationsThe authors’ research findings not only complement prior work on the linkage between customer satisfaction and firm value by incorporating a managerial perspective but also respond to the recent call for further work on how relevant marketing metrics drive organizational decisions and firms’ financial performance. It should be noted that findings are limited to firms that release both a voluntary issuance of management forecasts and ACSI.Practical implicationsThe study results shed light on the justification of marketing expenditures and provide a response to the call for marketing accountability. The study results also enable managers to make better decisions about whether and when to issue a forecast. The authors’ research further calls stakeholders’ attention to the presence of management forecast optimism with respect to satisfaction.Originality/valueDespite the importance of managers as primary information generators and disseminators in the capital markets, there appears to be little discussion on the satisfaction’s relevance to market participants, particularly in relation to the role of managers. Therefore, this investigation is the first to empirically show the relevance of ACSI to management earnings forecasts that have been ignored in the marketing literature.

scholarly journals The impact of litigation risk on corporate prospective disclosure: A review of the empirical literature

2012 ◽  
Vol 10 (1) ◽  
pp. 53-61 ◽  
Author(s):  
Gerry Gallery ◽  
Jodie Nelson ◽  
Chan Guo
Keyword(s):  
Earnings Forecasts ◽  
Empirical Literature ◽  
Future Research ◽  
Litigation Risk ◽  
Management Earnings Forecasts ◽  
Differential Impact ◽  
Disclosure Decisions ◽  
Secondary Factor ◽  
External Governance ◽  
The Impact

We review the literature on the impact of litigation risk (a form of external governance) on corporate prospective disclosure decisions as reflected in management earnings forecasts. From this analysis we identify four key areas for future research. First, litigation risk warrants more attention from researchers; currently it tends to be treated as a secondary factor impacting MEF decisions. Second, it would be informative from a governance perspective for researchers to explore why litigation risk has a differential impact on MEF decisions across countries. Third, understanding the interaction between litigation risk and forecast/firm-specific characteristics is important from management, investor and regulatory perspectives but is currently under-explored Last, research on the litigation risk and MEF attributes link is piecemeal and incomplete, requiring more integrated and expanded analysis.

Restatement Disclosures and Management Earnings Forecasts

2013 ◽  
Vol 27 (2) ◽  
pp. 347-369 ◽  
Author(s):  
Michael Ettredge ◽  
Ying Huang ◽  
Weining Zhang
Keyword(s):  
Voluntary Disclosure ◽  
Earnings Forecasts ◽  
Management Earnings Forecasts ◽  
Quarterly Earnings ◽  
Financial Restatements ◽  
The Impact ◽  
Information Providers

SYNOPSIS We examine the impact of financial restatements on managers' subsequent earnings forecasts. We argue that restatements create conflicting incentives. One incentive is to repair manager reputations as information providers by providing more and better guidance via earnings forecasts. The opposing incentive is to avoid risk by reducing the information in forecasts. We find that compared to control firms, restatement companies exhibit a decreased propensity to issue quarterly earnings forecasts following restatements. Those that do make forecasts issue fewer forecasts in post-restatement periods. We also find that post-restatement forecasts are less precise, and are less optimistically biased. Overall, our results suggest that, rather than increasing voluntary disclosure in the form of forecasts, managers of restatement companies exhibit risk-averting forecasting behavior following restatements.

scholarly journals The Impact Of Social Capital On The Propensity And Properties Of Management Earnings Forecasts

2014 ◽  
Vol 30 (6) ◽  
pp. 1803
Author(s):  
Xinyi Lu
Keyword(s):  
United States ◽  
Social Capital ◽  
Voluntary Disclosure ◽  
Earnings Forecasts ◽  
The United States ◽  
Earnings Forecast ◽  
Management Earnings Forecasts ◽  
Financial Factor ◽  
The Impact ◽  
The Relationship

This paper examines the relationship between the regional variation in social capital in the United States and the propensity and properties of the management earnings forecasts. Social capital refers to connections among individualssocial networks and the norms of reciprocity and trustworthiness that arise from them (Putnam 2000). Using a comprehensive sample of companies in the United States, we find that firms located in region with higher social capital are more likely to issue a management earnings forecast and are inclined to forecast more frequently. In addition, earnings forecasts made by those firms tend to be more specific. Our findings suggest that mangers of firms in the high social capital regions are more likely to be concerned about their reputation of providing transparent information regarding their businesses because of the close connections among individuals and the greater propensities to honor obligations. This study contributes to the accounting literature by identifying a non-financial factor (i.e., social capital) that affects managements voluntary disclosure practices.

scholarly journals The relationship between director independence, reputation and management earnings forecasts

2008 ◽  
Vol 6 (2) ◽  
pp. 404-419 ◽  
Author(s):  
Howard Chan ◽  
Robert Faff ◽  
Paul Mather ◽  
Alan Ramsay
Keyword(s):  
Audit Committee ◽  
Earnings Forecasts ◽  
Independent Director ◽  
Management Forecasts ◽  
Management Earnings Forecasts ◽  
Governance Environment ◽  
Prior Literature ◽  
The Impact ◽  
Director Independence ◽  
The Relationship

Informative management earnings forecasts potentially reduce information asymmetries in capital markets. We examine the relationship between corporate governance and management earnings forecasts. We extend the prior literature by examining the impact of independent director reputation on characteristics of management forecasts, by refining the previously used proxy for director independence and by distinguishing between routine and non-routine forecasts in the Australian governance environment. We find a significant positive relationship between the likelihood and frequency of firms issuing management earnings forecasts and our measures of audit committee independence and independent director reputation but not board independence. However, there is some evidence that director independence is related to more specific forecasts. These results are driven by routine earnings forecasts over which, it is argued, management have greater discretion.

The impact of conservatism on management earnings forecasts

2009 ◽  
Vol 47 (3) ◽  
pp. 192-207 ◽  
Author(s):  
Kai Wai Hui ◽  
Steve Matsunaga ◽  
Dale Morse
Keyword(s):  
Earnings Forecasts ◽  
Management Earnings Forecasts ◽  
The Impact
Sign in / Sign up

Export Citation Format

Share Document