Do management earnings forecasts incorporate information in accruals?

Weihong Xu

Journal of Accounting and Economics, 2010, vol. 49, issue 3, 227-246

Abstract: I investigate whether management earnings forecasts fully reflect the implications of accruals for future earnings. I find that managers overestimate accrual persistence in range forecasts but not in point forecasts and that managers' accrual-related forecast bias in range forecasts increases with forecast range and forecast horizon. My results suggest that managers overestimate accrual persistence when faced with greater difficulty forecasting earnings. Moreover, I find that managers' accrual-related forecast bias in range forecasts is somewhat affected by managerial opportunism and fear of litigation. Finally, I find accrual mispricing for firms issuing range forecasts but not for firms issuing point forecasts.

Keywords: Accruals; Persistence; Management; forecasts; Forecast; errors (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaecon:v:49:y:2010:i:3:p:227-246

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