Corporate Social Responsibility Awareness and Management Forecast Bias

Megumi Suto () and Hitoshi Takehara ()
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Megumi Suto: Waseda University
Hitoshi Takehara: Waseda University

Chapter Chapter 7 in Corporate Social Responsibility and Corporate Finance in Japan, 2018, pp 155-177 from Springer

Abstract: Abstract For investors, how to gain accurate and unbiased information about future earnings of an investee company is critical to demand a risk premium that is reflected in the expected rate of return. Management earnings forecastsManagement earnings forecasts are a major source of information about future earnings and are posited as especially important in the Japanese disclosure system. However, managers might face incentive bias toward opportunistic decisions on the forecast from a short-term view, as there is a conflict of interest between managers and investors about risk premium. The issue of how to mitigate such incentive bias is a key for disciplined pricing in the market by reducing information asymmetry. Management earnings forecasts definitely influence both the quality and quantity of information about future earnings. Responsible management forecasts are the core of the self-disciplining mechanism to provide more accurate and less biased information in the market.

Keywords: Management Forecasts; Forecast Bias; Earnings Forecasts; Intentional Bias; Residual Income Valuation Model (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1007/978-981-10-8986-2_7

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