Does the midpoint of range earnings forecasts represent managers' expectations?

• 成果类型: Article
• 署名作者: Ciconte, William, III; Kirk, Marcus; Tucker, Jennifer Wu
• 署名单位: State University System of Florida; University of Florida
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-013-9259-2
• 发表日期: 2014
• 页码: 628-660
• 关键词: quarterly earnings; analysts; guidance; credibility; association; outcomes; STREET; form

摘要

The accounting literature has used the midpoint of range forecasts in various research settings, assuming that the midpoint is the best proxy for managers' earnings expectations revealed in range forecasts. We argue that given managers' asymmetric loss functions regarding earnings surprises, managers are unlikely to place their true earnings expectations at the midpoint of range forecasts. We predict that managers' true expectations are close to the upper bound of range forecasts. We find evidence consistent with these predictions in 1996-2010, especially in the recent decade. Despite their role as sophisticated information intermediaries, analysts barely unravel the pessimistic bias that managers embed in range forecasts. Furthermore, we find that the upper bound rather than the midpoint better represents investors' interpretation of managers' expectations in recent times. Our study cautions researchers to refine their research designs that use management range forecasts and sheds light on the role of financial analysts in the earnings expectations game.