Firm Performance and Macro Forecast Accuracy

Mari Tanaka, Nicholas Bloom, Joel David and Maiko Koga

No 24776, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Ever since Keynes’ famous quote about animal spirits, there has been an interest in linking firms’ expectations and actions. However, empirical evidence has been limited due to a lack of firm-level panel data on expectations and outcomes. In this paper, we build such a dataset by combining a unique survey of Japanese firms’ GDP forecasts with company accounting data for 25 years for over 1,000 large Japanese firms. We find four main results. First, firms’ GDP forecasts are positively associated with their employment, investment, and output growth in the subsequent year. Second, both optimistic and pessimistic forecast errors lower profitability. Third, while over-optimistic forecasts lower measured productivity, over-pessimistic forecasts do not tend to have an effect on productivity. Overall, these results are stronger for firms whose performance is more sensitive to the state of macroeconomy. We show that a simple model of firm input choice under uncertainty and costly adjustment can rationalize there results. Finally, larger and more cyclically sensitive firms make more accurate forecasts, presumably reflecting a higher return to accuracy for these firms. More productive, older, and bank-owned firms also make more accurate forecasts, suggesting that forecasting ability is also linked to management ability, experience, and governance. Collectively, our results highlight the importance of firms’ forecasting ability for micro and macro performance.

JEL-codes: E0 M0 (search for similar items in EconPapers)
Date: 2018-06
New Economics Papers: this item is included in nep-eff, nep-ent, nep-for and nep-mac
Note: CF EFG LS ME PR
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Citations: View citations in EconPapers (14)

Published as Mari Tanaka & Nicholas Bloom & Joel M. David & Maiko Koga, 2019. "Firm Performance and Macro Forecast Accuracy," Journal of Monetary Economics, .

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Related works:
Journal Article: Firm performance and macro forecast accuracy (2020)
Working Paper: Firm Performance and Macro Forecast Accuracy (2018)
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