Managerial Myopia, Earnings Guidance, and Investment

• 成果类型: Article
• 署名作者: Aghamolla, Cyrus; Hashimoto, Tadashi
• 署名单位: University of Minnesota System; University of Minnesota Twin Cities; Yeshiva University
• 刊物名称: CONTEMPORARY ACCOUNTING RESEARCH
• ISSN/ISSBN: 0823-9150
• DOI: 10.1111/1911-3846.12820
• 发表日期: 2023
• 页码: 166-195
• 关键词: Analyst forecasts; ceo ability; management; FIRMS; DISCLOSURES; INFORMATION; incentives; QUALITY

摘要

This study investigates the real effects of management communication, specifically of forecasts or earnings guidance, on investment. Managers can signal the strength of their projects through accuracy in their earnings guidance. This leads less accurate managers to distort their investments; the equilibrium investment strategy involves over-investment when earnings exceed the forecast and under-investment when earnings fall short. Moreover, we find that managers are pessimistic in their forecasts, which helps to explain the corresponding well-documented empirical regularity. This downward bias increases the likelihood of investment manipulation but decreases the real loss from distortion. Interestingly, the over-investment induced by earnings guidance helps to mitigate the classic under-investment problem for a myopic manager with unobservable investment. Earnings guidance can therefore be value-increasing when managerial myopia is severe.