Consistency in meeting or beating earnings expectations and management earnings forecasts

William J. Kross, Byung T. Ro and Inho Suk

Journal of Accounting and Economics, 2011, vol. 51, issue 1, 37-57

Abstract: This paper provides evidence that firms that have consistently met or beaten analysts’ earnings expectations (MBE) provide more frequent “bad news” management forecasts than firms with no established string of MBE, particularly when existing analyst forecasts are optimistic. This suggests that firms with a consistent MBE record are more likely to guide analysts’ expectations downward to avoid breaking the consistency. Subsequent analyst forecast revisions following bad news management forecasts issued by these firms are dampened, implying that analysts suspect that these forecasts may be opportunistic. The relation between management forecasts and MBE consistency is stronger after Regulation FD.

Keywords: Consistency in meeting and beating earnings expectations; Management forecast disclosure; Forecast bias; Analyst forecast revision; Regulation Fair Disclosure (search for similar items in EconPapers)
JEL-codes: G14 G17 M41 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (32)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaecon:v:51:y:2011:i:1:p:37-57

DOI: 10.1016/j.jacceco.2010.06.004

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