Major government customer and management earnings forecasts

Agnes C. S. Cheng, Wenli Huang () and Shaojun Zhang ()
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Agnes C. S. Cheng: The Hong Kong Polytechnic University
Wenli Huang: The Hong Kong Polytechnic University
Shaojun Zhang: The Hong Kong Polytechnic University

Frontiers of Business Research in China, 2020, vol. 14, issue 1, 1-20

Abstract: Abstract This paper examines whether customer base composition in the US, that is, whether a firm’s major customers are government entities or publicly traded companies, affects the properties of its management earnings forecasts (MEFs). Using a sample of 1168 MEFs from 1998 to 2014, we find that firms whose major customers are government entities (i.e., government suppliers) issue more precise and more accurate MEFs than firms whose major customers are public companies (i.e., corporate suppliers). Moreover, when managers disclose negative information to the market, earnings forecasts issued by government suppliers have greater price impact than those issued by corporate suppliers. Collectively, our empirical results suggest that having major government customers has a positive impact on the quality of MEFs.

Keywords: Customer–supplier relationship; Demand uncertainty; Government supplier; Information spillover; Management earnings forecasts (MEFs) (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (2)

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DOI: 10.1186/s11782-020-00088-0

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