Consistency in Management Earnings Forecast Characteristics
|Speaker:||Dr Giulia Redigolo, University of Padova|
|Date:||Wednesday 8 April 2015|
|Location:||Constantine Leventis Room|
This paper examines whether US firms engage in consistent patterns of management earnings forecasts and which factors most likely explain the phenomenon. Using a comprehensive sample of management earnings forecasts hand-collected from the original text of company press releases, I develop a new measure of consistency considering three characteristics: precision, disaggregation and qualitative information. I classify firm as “consistent” based on the persistence of characteristics over time. The paper investigates management earnings forecasts from a cross-sectional perspective and attempts to shed new light on the iterative nature of management earnings forecasts characteristics, which appear to be the least well-understood component of the forecasting activity. Preliminary results suggest that CEO experience, industry competition and firm size contribute to explain level-based consistency. Among the factors explaining consistency at the characteristic-level, firm size is a common determinant for all characteristics specifications. Consistency in precision depends on firm performance. Consistency in disaggregation is associated with litigations risk, uncertainty and analyst coverage, while consistency in additional information depends on the experience accumulated by the CEO and the level of uncertainty permeating a firm’s environment.
Keywords: Management Earnings Forecasts, Forecast Characteristics, Consistency, Information Environment
Data Availability: Data used in this study are available from public sources indicated in the text.