Do Management EPS Forecasts Allow Returns to Reflect Future Earnings? Implications for the Continuation of Management’s Quarterly Earnings Guidance
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 c...
Saved in:
Main Authors: | , , , |
---|---|
Format: | text |
Language: | English |
Published: |
Institutional Knowledge at Singapore Management University
2011
|
Subjects: | |
Online Access: | https://ink.library.smu.edu.sg/soa_research/140 https://ink.library.smu.edu.sg/context/soa_research/article/1139/viewcontent/SSRN_id1439023.pdf |
Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
Institution: | Singapore Management University |
Language: | English |
id |
sg-smu-ink.soa_research-1139 |
---|---|
record_format |
dspace |
spelling |
sg-smu-ink.soa_research-11392019-10-24T08:05:06Z Do Management EPS Forecasts Allow Returns to Reflect Future Earnings? Implications for the Continuation of Management’s Quarterly Earnings Guidance CHOI, Jong-Hag MYERS, Linda ZANG, Yoonseok ZIEBART, Dave 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. 2011-03-01T08:00:00Z text application/pdf https://ink.library.smu.edu.sg/soa_research/140 info:doi/10.1007/s11142-010-9131-6 https://ink.library.smu.edu.sg/context/soa_research/article/1139/viewcontent/SSRN_id1439023.pdf http://creativecommons.org/licenses/by-nc-nd/4.0/ Research Collection School Of Accountancy eng Institutional Knowledge at Singapore Management University Management forecasts Future earnings response coefficient (FERC) Earnings guidance Forecast characteristics Accounting Corporate Finance |
institution |
Singapore Management University |
building |
SMU Libraries |
continent |
Asia |
country |
Singapore Singapore |
content_provider |
SMU Libraries |
collection |
InK@SMU |
language |
English |
topic |
Management forecasts Future earnings response coefficient (FERC) Earnings guidance Forecast characteristics Accounting Corporate Finance |
spellingShingle |
Management forecasts Future earnings response coefficient (FERC) Earnings guidance Forecast characteristics Accounting Corporate Finance CHOI, Jong-Hag MYERS, Linda ZANG, Yoonseok ZIEBART, Dave Do Management EPS Forecasts Allow Returns to Reflect Future Earnings? Implications for the Continuation of Management’s Quarterly Earnings Guidance |
description |
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. |
format |
text |
author |
CHOI, Jong-Hag MYERS, Linda ZANG, Yoonseok ZIEBART, Dave |
author_facet |
CHOI, Jong-Hag MYERS, Linda ZANG, Yoonseok ZIEBART, Dave |
author_sort |
CHOI, Jong-Hag |
title |
Do Management EPS Forecasts Allow Returns to Reflect Future Earnings? Implications for the Continuation of Management’s Quarterly Earnings Guidance |
title_short |
Do Management EPS Forecasts Allow Returns to Reflect Future Earnings? Implications for the Continuation of Management’s Quarterly Earnings Guidance |
title_full |
Do Management EPS Forecasts Allow Returns to Reflect Future Earnings? Implications for the Continuation of Management’s Quarterly Earnings Guidance |
title_fullStr |
Do Management EPS Forecasts Allow Returns to Reflect Future Earnings? Implications for the Continuation of Management’s Quarterly Earnings Guidance |
title_full_unstemmed |
Do Management EPS Forecasts Allow Returns to Reflect Future Earnings? Implications for the Continuation of Management’s Quarterly Earnings Guidance |
title_sort |
do management eps forecasts allow returns to reflect future earnings? implications for the continuation of management’s quarterly earnings guidance |
publisher |
Institutional Knowledge at Singapore Management University |
publishDate |
2011 |
url |
https://ink.library.smu.edu.sg/soa_research/140 https://ink.library.smu.edu.sg/context/soa_research/article/1139/viewcontent/SSRN_id1439023.pdf |
_version_ |
1770568670913757184 |