The joint effects of macroeconomic uncertainty and cyclicality on management and analyst earnings forecasts
Xiaohui Yang and
Journal of Economics and Business, 2021, vol. 116, issue C
Prior literature examines the effects of both macroeconomic uncertainty and cyclicality (how strongly a firm's earnings is tied to macroeconomic conditions) on management and analyst earnings forecasts. However, these studies consider macroeconomic uncertainty and cyclicality independently and find conflicting results. This study argues that macroeconomic uncertainty and cyclicality are inextricably linked together, and should be studied jointly. Using a sample of earnings forecasts from 2001 to 2015, we find the following: (1) Kim, Pandit, and Wasley (2016)'s finding that heightened macroeconomic uncertainty decreases management's propensity to issue earnings forecasts is largely driven by firms with low cyclicality and (2) Hutton, Lee, and Shu (2012)'s finding that analysts issue more accurate forecasts than management for firms with high cyclicality only holds when macroeconomic uncertainty is high; increases in macroeconomic uncertainty lead to more accurate analyst forecasts relative to management forecasts only for firms with high cyclicality. These findings are useful to both researchers and investors interested in understanding how macroeconomic factors affect earnings forecasts.
Keywords: Macroeconomic uncertainty; Cyclicality; Management forecasts; Analyst forecasts (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jebusi:v:116:y:2021:i:c:s0148619521000242
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