Management Earnings Forecasts: A Review and Framework
D. Eric Hirst
University of Texas at Austin
University of Texas
Georgia Institute of Technology
January 11, 2008
In this paper, we provide a framework in which to view management earnings forecasts. Specifically, we categorize earnings forecasts as having three components - antecedents, characteristics, and consequences that roughly correspond to the timeline associated with an earnings forecast. By evaluating management earnings forecast research within the context of this framework, we render three conclusions. First, forecast characteristics appear to be the least well-understood component of earnings forecasts - both in terms of theory and empirical research - even though it is the component over which managers have the most control. Second, much of the prior research focuses on how one forecast antecedent or characteristic influences forecast consequences and does not study potential interactions among the three components. Third, much of the prior research ignores the iterative nature of management earnings forecasts - that is, forecast consequences of the current period influence antecedents and chosen characteristics in subsequent periods. Implications for researchers as well as educators, managers, investors, and regulators are provided.
Number of Pages in PDF File: 50
Keywords: Management Earnings Forecasts, Framework, Review
JEL Classification: M41, M45
Date posted: August 2, 2006 ; Last revised: January 22, 2008
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