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http://ssrn.com/abstract=928871
 
 

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Management Forecasts in Japan: An Empirical Study of Forecasts that are Effectively Mandated


Kazuo Kato


Osaka University of Economics

Douglas J. Skinner


The University of Chicago - Booth School of Business

Michio Kunimura Sr.


Meijo University

April 30, 2009

The Accounting Review, Vol. 84, No. 5, September 2009

Abstract:     
We study management forecasts in Japan, where forecasts are effectively mandated but managers have considerable latitude over the numbers they release. We find that managers’ initial earnings forecasts for a fiscal year are systematically upward-biased but that they revise their forecasts downward during the fiscal year so that most earnings surprises are non-negative. Managers’ initial forecast optimism is inversely related to firm performance, and is more pronounced for firms with higher levels of insider ownership, for smaller firms, and for firms with a history of forecast optimism. The fact that managers’ forecasts tend to be consistently optimistic suggests that reputation effects are insufficient to ensure managerial forecast accuracy. We also find that the information content of managers’ forecasts is related to proxies for whether market participants view the forecasts as credible.

Number of Pages in PDF File: 51

Keywords: Management Forecasts, Disclosure, Litigation, Japan

JEL Classification: G14, M41, M45, M47

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Date posted: September 8, 2006 ; Last revised: December 29, 2012

Suggested Citation

Kato, Kazuo and Skinner, Douglas J. and Kunimura, Michio, Management Forecasts in Japan: An Empirical Study of Forecasts that are Effectively Mandated (April 30, 2009). The Accounting Review, Vol. 84, No. 5, September 2009. Available at SSRN: http://ssrn.com/abstract=928871

Contact Information

Kazuo Kato
Osaka University of Economics ( email )
2-2-8 Osumi
Higashiyokogawa-ku
Osaka
Japan
Douglas J. Skinner (Contact Author)
The University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-7137 (Phone)

Chicago Booth School of Business Logo

Michio Kunimura Sr.
Meijo University ( email )
Japan
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