Career Concerns, Investment, and Management Forecasts

• 成果类型: Article
• 署名作者: Kim, Tae Wook; Li, Jing; Pae, Suil
• 署名单位: Sungkyunkwan University (SKKU)
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/TAR-2019-0272
• 发表日期: 2023
• 页码: 337-363
• 关键词: accounting measurement; Financial structure; capital-markets; Dividend policy; INFORMATION; disclosure; FIRMS; ECONOMICS; strategy; MODEL

摘要

A firm manager is concerned about both the firm value and the market assessments of his abilities. When investing in a project, he has private knowledge of his project-related ability that interacts with the project investment, and his general ability that produces a cash flow independent of the project cash flow. The concerns about the general (project-related) ability assessment create a signaling incentive to decrease (increase) investment. In the presence of underinvestment (overinvestment), higher-quality earnings information reduces (improves) equilibrium efficiency. When the manager issues an earnings forecast as an additional signaling device, the forecast is upwardly biased, and the equilibrium investment is smaller than that without a forecast. The latter is because the signaling incentive to decrease investment is strengthened. When the manager's concerns about the general ability assessment are relatively large, he is better off by committing to no forecast. Novel empirical predictions about investment and earnings forecast emerge.