Nexus between the anchoring effect and management earnings forecasts: An investigation of the listed firms in the US stock market

Ahmed Bouteska, Taimur Sharif and Mohammad Zoynul Abedin

Journal of Contemporary Accounting and Economics, 2025, vol. 21, issue 2

Abstract: This paper investigates the influence of the anchoring effects on management earnings forecasting (MF) process among the US firms using the voluntary disclosures of MFs during the period 2015–2022. The results show evidence that the MFs’ valuation of the present period is influenced by the internal and external anchoring effects, reflected by firms’ previous earnings forecasts and the earnings forecasts from their industry counterparts, respectively. Furthermore, we highlight that stronger anchoring effects deteriorate the accuracy of the MF and improve the market reaction to the issued forecasts. Given these findings, we suggest that the informational content of the anchor heuristic in MF is affected in the stock prices. Overall, our study complement the behavioral finance literature and warn users about misleading or unreliable information for anchor heuristic in MF when it comes to make investment decisions.

Keywords: Behavioral finance; Anchor heuristic; Voluntary disclosure; Management earnings forecasting; Accuracy; Market reaction; US stock market (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jocaae:v:21:y:2025:i:2:s1815566925000190

DOI: 10.1016/j.jcae.2025.100472

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