HOW DO INVESTORS PERCEIVE LONG-TERM GROWTH TARGETS AND FORECAST HORIZONS IN STRATEGIC PLANS? EVIDENCE FROM ITALIAN FIRMS

Giuseppe Di Martino ()
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Giuseppe Di Martino: University of Bari Aldo Moro, Department of Economics, Management and Business Law, Largo Abbazia Santa Scolastica, 53, 70124 Bari, Italy

Journal of Financial Management, Markets and Institutions (JFMMI), 2019, vol. 07, issue 02, 1-33

Abstract: We examine the information content of strategic-plans’ long-term growth targets (SPLTG) and of strategic-plans’ forecast horizons (SPFH). Using a sample of 224 strategic plan presentations by Italian listed companies during the period 2002–2018, we provide evidence that the SPLTG conveys credible and useful information to investors. We also assume that longer forecast horizons are more uncertain and we find that stock price reaction is negatively associated with long-term forecast horizons. Then, we investigate whether SPLTG presented in conjunction with long-term SPFH are perceived as less credible. The findings document that investors perceive long-term growth targets as credible regardless of the SPFH length. Our study contributes to the current debate on the use of strategic plans as comprehensive disclosure able to provide credible and useful information.

Keywords: Forecast horizon; information content; long-term growth forecast; strategic plan; value relevance (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1142/S2282717X1950004X

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