Do management EPS forecasts allow returns to reflect future earnings? Implications for the continuation of management's quarterly earnings guidance

• 成果类型: Article
• 署名作者: Choi, Jong-Hag; Myers, Linda A.; Zang, Yoonseok; Ziebart, David A.
• 署名单位: University of Arkansas System; University of Arkansas Fayetteville; Seoul National University (SNU); Singapore Management University; University of Kentucky
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-010-9131-6
• 发表日期: 2011
• 页码: 143-182
• 关键词: operating cash flows; CORPORATE DISCLOSURE; price reactions; FULLY REFLECT; stock-prices; FIRMS; INFORMATION; ability; CONSEQUENCES; association

摘要

Using 18,253 firm-year observations from 1998 through 2003, we build on literature suggesting that more informative disclosures allow returns to better reflect future earnings and test whether management earnings per share forecasts and their characteristics influence the future earnings response coefficient (FERC). We find that FERCs are greater for forecasting firms and when forecasts are more frequent or precise. We suggest that more frequent and more precise forecasts assist investors in better predicting future earnings. Importantly, we find that quarterly and short-term forecasts incrementally increase the association between returns and future earnings beyond annual and long-term forecasts; thus, even short-term, quarterly forecasts allow investors to form better expectations about future earnings. This suggests a benefit of quarterly earnings forecasts possibly overlooked in recommendations from the United States Chamber of Commerce, CFA Institute, Business Roundtable Institute for Corporate Ethics, and The Conference Board to eliminate quarterly earnings guidance.