Risk-based forecasting and planning and management earnings forecasts

• 成果类型: Article
• 署名作者: Ittner, Christopher D.; Michels, Jeremy
• 署名单位: University of Pennsylvania
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-017-9396-0
• 发表日期: 2017
• 页码: 1005-1047
• 关键词: scenario development; determinants; managerial; QUALITY; IMPACT

摘要

This study examines the association between a firm's internal information environment and the accuracy of its externally disclosed management earnings forecasts. Internally, firms use forecasts to plan for uncertain futures. The risk management literature argues that integrating risk-related information into forecasts and plans can improve a firm's ability to forecast financial outcomes. We investigate whether this internal information manifests itself in the accuracy of external earnings guidance. Using detailed survey data and publicly disclosed management earnings forecasts from a sample of publicly traded U.S. companies, we find that more sophisticated risk-based forecasting and planning processes are associated with smaller earnings forecast errors and narrower forecast widths. These associations hold across a variety of different planning horizons (ranging from annual budgeting to long-term strategic planning), providing empirical support for the theoretical link between internal information quality and the quality of external disclosures.