Quality concerns over managers' quarterly earnings guidance

K.C. Lin

Advances in accounting, 2017, vol. 38, issue C, 113-125

Abstract: This paper investigates how often and to what extent quarterly earnings guidance is of poor quality, the causes of poor quality guidance, and the ultimate effect of such guidance on investors' earnings expectations. I operationalize poor quality guidance as that guidance which is directionally incorrect relative to the pre-guidance analyst consensus. Results show that 12% of the sample meets this definition. In terms of what causes directionally incorrect guidance, expectation management and forecast difficulty play an equally important role in determining directionally incorrect guidance. Both analysts and market participants are adversely impacted by directionally incorrect guidance, but substantially less so when the likelihood of directionally incorrect guidance increases. Finally, market participants appear to be more capable of using publicly observable cues to access the likelihood of directionally incorrect guidance increases.

Keywords: Quarterly earnings guidance; Voluntary disclosure; Financial analysts; Market reaction (search for similar items in EconPapers)
JEL-codes: G14 G24 M4 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0882611017300640
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:advacc:v:38:y:2017:i:c:p:113-125

DOI: 10.1016/j.adiac.2017.07.002

Access Statistics for this article

Advances in accounting is currently edited by Dennis Caplan

More articles in Advances in accounting from Elsevier
Bibliographic data for series maintained by Catherine Liu ().