The Effect of Analysts' Disaggregated Forecasts on Investors and Managers PDF Download
Are you looking for read ebook online? Search for your book and save it on your Kindle device, PC, phones or tablets. Download The Effect of Analysts' Disaggregated Forecasts on Investors and Managers PDF full book. Access full book title The Effect of Analysts' Disaggregated Forecasts on Investors and Managers by Landon M. Mauler. Download full books in PDF and EPUB format.
Author: Landon M. Mauler
Publisher:
ISBN:
Category :
Languages : en
Pages :
Get Book Here
Book Description
I examine whether analysts' tax forecasts are informative to investors and whether analysts' tax forecasts impact firm behavior. Using I/B/E/S data from 2002-2014, I find that investors utilize both analysts' pre- and after-tax earnings forecasts in evaluating firm performance, indicating analysts' tax forecasts are value-relevant. Furthermore, evidence that investors discount earnings management through the income tax expense is limited to firms with tax forecast coverage. In examining the impact of analysts' tax forecasts on firm behavior, I find analysts' tax forecast coverage is positively associated with quantitative and qualitative tax footnote disclosure. The results suggest that analysts' tax forecasts are value-relevant and that analysts' tax coverage impacts firm decisions related to the income tax expense account. This evidence informs academics and practitioners as to the role of analysts' tax forecasts.
Author: Landon M. Mauler
Publisher:
ISBN:
Category :
Languages : en
Pages :
Get Book Here
Book Description
I examine whether analysts' tax forecasts are informative to investors and whether analysts' tax forecasts impact firm behavior. Using I/B/E/S data from 2002-2014, I find that investors utilize both analysts' pre- and after-tax earnings forecasts in evaluating firm performance, indicating analysts' tax forecasts are value-relevant. Furthermore, evidence that investors discount earnings management through the income tax expense is limited to firms with tax forecast coverage. In examining the impact of analysts' tax forecasts on firm behavior, I find analysts' tax forecast coverage is positively associated with quantitative and qualitative tax footnote disclosure. The results suggest that analysts' tax forecasts are value-relevant and that analysts' tax coverage impacts firm decisions related to the income tax expense account. This evidence informs academics and practitioners as to the role of analysts' tax forecasts.
Author: Lei Dong
Publisher:
ISBN:
Category :
Languages : en
Pages : 38
Get Book Here
Book Description
Prior research finds that investors respond more favorably to a disaggregated earnings forecast than to an aggregated one immediately after the forecast. The present study examines the impact of this initial favorable effect on investors' decisions following earnings surprise announcements. Based on Expectation Violation Theory, we posit that the benefit of a disaggregated earnings forecast can backfire when management subsequently reports an earnings surprise. The results of our experiment indicate that investors' negative reactions are stronger if they first observed a disaggregated forecast than if they first saw an aggregated forecast. We find that investors make the greatest downward adjustments in investment interest when the disaggregated forecast is later found to be disappointing. This study provides evidence of the complexity of the effect of disaggregated earnings forecast and adds to the literature concerning the costs and benefits of accounting information disaggregation.
Author: Shana Clor-Proell
Publisher:
ISBN:
Category :
Languages : en
Pages : 35
Get Book Here
Book Description
Firms often issue disaggregated earnings forecasts, and prior research reveals benefits to doing so. However, we hypothesize and experimentally find that the benefits of disaggregated forecasts do not necessarily carry over to the time of actual earnings announcements. Rather, disaggregated forecasts create multiple points of possible comparison between the forecast and the subsequent earnings announcement. Thus, when firms disaggregate forecasts and subsequently release disaggregated actual earnings numbers, investors reward firms that beat those multiple benchmarks, but punish firms that miss those multiple benchmarks. Thus, we show that issuing a disaggregated earnings forecast to achieve the associated benefits can backfire after the announcement of actual earnings. Our results have implications for researchers and firm managers.
Author: D. Eric Hirst
Publisher:
ISBN:
Category :
Languages : en
Pages : 48
Get Book Here
Book Description
An important problem facing firm managers is how to enhance the credibility, or believability, of their earnings forecasts. In this paper, we experimentally test whether a characteristic of an earnings forecast from managementyacute;namely, whether it is disaggregatedyacute;can affect its credibility. We also test whether disaggregation moderates the relation between managerial incentives and forecast credibility. Disaggregated forecasts include an earnings forecast as well as forecasts of other key line items comprising that earnings forecast. Our results indicate that disaggregated forecasts are judged to be more credible than aggregated ones and that disaggregation works to counteract the effect of high incentives. We also develop and test an original model that explains how disaggregation positively impacts three factors that, in turn, influence forecast credibility: perceived precision of management's beliefs, perceived clarity of the forecast, and perceived financial reporting quality. We show that forecast disaggregation works to remedy incentive problems only via its effect on perceived financial reporting quality. Overall, our study adds to our understanding of how firm managers can credibly communicate their expectations about the future to market participants.
Author: Millicent Chang
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
Get Book Here
Book Description
Analyst and management forecasts signal a firm's future prospects and research suggests that investors are conscious of the differing incentives to release news. We examine investor reaction to the information contained in these forecasts by considering whether decisions about their shareholdings are influenced by expectations about the motives of analysts and management. Using an experiment that manipulated the type of news released and investors' stock position, we found that unfavorable forecasts had a greater effect than favorable forecasts. Investors also place more emphasis on the news released by analysts, suggesting that information from an independent source appears to be more persuasive.
Author: Somnath Das
Publisher:
ISBN:
Category :
Languages : en
Pages : 55
Get Book Here
Book Description
We study circumstances when analysts' forecasts diverge from managers' forecasts after management guidance, and the consequences of this divergence for investors and analysts. Our results show that investors' return response to earnings surprises based on analyst forecasts is significantly weaker when analyst and management forecasts diverge, and that this attenuating effect is stronger when the management forecast is more credible. When the divergent management forecast is more accurate than the analyst consensus forecast, the subsequent-quarter analyst consensus forecast is significantly more accurate than that of the current quarter, and exhibits less serial correlation. Overall, our findings suggest that, when analyst and management forecasts diverge, investors find the two sources to contain complementary information, and analysts learn to improve their subsequent forecasts.
Author: Benjamin Lansford
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
Get Book Here
Book Description
Whether managers should provide earnings guidance, especially quarterly guidance, has been a hotly debated policy issue. Influential organizations have urged firms to stop providing earnings guidance to reduce earnings fixation and short-termism in the capital markets. Little attention has been paid to an alternative proposal: instead of ceasing earnings guidance, companies could provide disaggregated earnings guidance. No archival evidence exists regarding the determinants of disaggregated earnings guidance and its effects on the firm and its information environment. We find that once managers provide guidance, the decision to disaggregate this guidance is primarily driven by demand-and-supply factors that exhibit little change from year to year rather than by opportunistic factors. We find more timely analyst forecast revisions (with no compromise of forecast accuracy), a greater magnitude of revisions, and a larger reduction in analyst disagreement for disaggregating firms than for non-disaggregating firms. These findings suggest that disaggregation enriches a firm's information environment. We also find that disaggregation helps managers align analyst expectations with their own, but firms are punished by investors for providing multiple performance targets but missing them.
Author: Mohammed Atiquzzaman
Publisher: Springer Nature
ISBN: 9811674663
Category : Technology & Engineering
Languages : en
Pages : 1314
Get Book Here
Book Description
This book gathers a selection of peer-reviewed papers presented at the third Big Data Analytics for Cyber-Physical System in Smart City (BDCPS 2021) conference, held in Shanghai, China, on Nov. 27, 2021. The contributions, prepared by an international team of scientists and engineers, cover the latest advances made in the field of machine learning, and big data analytics methods and approaches for the data-driven co-design of communication, computing, and control for smart cities. Given its scope, it offers a valuable resource for all researchers and professionals interested in big data, smart cities, and cyber-physical systems.
Author: Lei Dong
Publisher:
ISBN:
Category :
Languages : en
Pages :
Get Book Here
Book Description
This paper examines how the level of disaggregation in earnings forecasts influences investors' reactions to earnings surprises. Previous research finds that investors respond more favorably to a disaggregated forecast than to an aggregated one immediately after the forecast. However, given that earnings forecasts are necessarily followed by earnings announcements, this initial characterization portrays an incomplete picture of forecast disaggregation without its effect on investor reaction following actual earnings outcome. Using an experiment, we present evidence that investors react negatively to forecast inaccuracy irrespective of the valence of the earnings news. Further, in line with expectation violation theory, the negative reactions are amplified for a disaggregated forecast when compared with an aggregated forecast. Consequently, we find that the initial favorable perceptions following a disaggregated forecast are diluted in a positive earnings surprise condition and disappear in a negative earnings surprise condition. Our mediation test suggests that the downward adjustments in investment interest are fully mediated by the impairment of perceived management credibility. Our findings suggest that disaggregated disclosures are not always beneficial, and add to the growing literature concerning the costs and benefits of accounting information disaggregation.
Author: Bin Ke
Publisher:
ISBN:
Category :
Languages : en
Pages :
Get Book Here
Book Description
This study offers evidence on the earnings forecast bias analysts use to please firm management and the associated benefits they obtain from issuing such biased forecasts in the years prior to Regulation Fair Disclosure. Analysts who issue initial optimistic earnings forecasts followed by pessimistic earnings forecasts before the earnings announcement produce more accurate earnings forecasts and are less likely to be fired by their employers. The effect of such biased earnings forecasts on forecast accuracy and firing is stronger for analysts who follow firms with heavy insider selling and hard-to-predict earnings. The above results hold regardless of whether a brokerage firm has investment banking business or not. These results are consistent with the hypothesis that analysts use biased earnings forecasts to curry favor with firm management in order to obtain better access to management's private information.
