Firms' response to macroeconomic estimation errors

• 成果类型: Article
• 署名作者: Binz, Oliver; Mayew, William J.; Nallareddy, Suresh
• 署名单位: Duke University; INSEAD Business School
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2021.101454
• 发表日期: 2022
• 关键词: aggregate market reaction; information-content; earnings guidance; news; fluctuations; returns; COORDINATION; uncertainty; LEVEL

摘要

Initial Gross Domestic Product (GDP) announcements are important economic signals that convey information on the state of the economy but contain substantial estimation error. We investigate how GDP estimation errors affect firms' real decisions and profitability. We find that GDP estimation errors are positively associated with one-quarter-ahead changes in firms' capital investments, production, inventory, and profitability. However, we observe long-run profitability reversals, which is consistent with initial over (under) production eventually being met with declines (increases) in future profitability. Furthermore, managerial responses to the estimation errors mimic the response to the true component of the GDP signal, suggesting that managers do not filter estimation errors and overreact to both GDP signal components. Our firm-level findings translate to the macroeconomic level, where we find that a long-run reversal follows a positive short-run aggregate investment response to GDP signal components.(C) 2021 Elsevier B.V. All rights reserved.