 Do managers provide misleading earnings forecasts before stock repurchases?Amrita S. Nain and Anand M. Vijh Financial Management, 2021, vol. 50, issue 4, 1013-1046 Abstract: We question previous evidence that managers mislead investors into selling their stock for artificially lowered prices by releasing overly negative earnings forecasts before stock repurchases. We rely on forecast errors (forecast minus actual earnings) and show that these are insignificantly different between repurchase and matching firms. Our tests are powerful at detecting small differences and yet, across multiple subsamples, we find no statistical difference in forecast errors of repurchase and matching firms. Prior evidence of managerial misleading relied on the negative stock market reaction to management forecasts. We show that this negative reaction is observed only in the subsample where board authorization of repurchase follows management forecast. When board authorization precedes forecast, market reaction to management forecasts for repurchase firms is somewhat higher than that for matching firms. Our evidence suggests that managers are not misleading but exploiting low market prices to the advantage of their long‐term shareholders. Date: 2021 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:finmgt:v:50:y:2021:i:4:p:1013-1046 Ordering information: This journal article can be ordered from Access Statistics for this article Financial Management is currently edited by William G. Christie More articles in Financial Management from Financial Management Association International Contact information at EDIRC. |
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