The Role of Supplementary Statements with Management Earnings Forecasts
Amy P. Hutton
Boston College - Carroll School of Management
Gregory S. Miller
University of Michigan, Stephen M. Ross School of Business
Douglas J. Skinner
The University of Chicago - Booth School of Business
Tuck Business School Working Paper No. 03-29; Harvard NOM Working Paper No. 03-53
We investigate managers' decisions to supplement their firms' management earnings forecasts. We classify these supplementary disclosures as either qualitative "soft talk" disclosures or verifiable forward-looking statements. We find that managers provide "soft talk" disclosures with similar frequency for good and bad news forecasts, but are more likely to supplement good news forecasts with verifiable forward-looking statements. We examine the market response to these forecasts and find that bad news earnings forecasts are always informative but that good news forecasts are informative only when supplemented by verifiable forward-looking statements, suggesting that these statements bolster the credibility of good news forecasts.
Keywords: disclosure, earnings forecasts, forward-looking statements
JEL Classification: M41, M45
Date posted: October 3, 2003
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