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Management Earnings Forecasts: A Review and Framework

Posted: 17 Jan 2008  

Shankar Venkataraman

Georgia Institute of Technology

Lisa Koonce

University of Texas

D. Eric Hirst

University of Texas at Austin

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Abstract

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.

Keywords: Management Earnings Forecasts, Voluntary Disclosures

JEL Classification: M41, M45

Suggested Citation

Venkataraman, Shankar and Koonce, Lisa and Hirst, D. Eric, Management Earnings Forecasts: A Review and Framework. Accounting Horizons, Vol. 22, No. 3, 2008. Available at SSRN: https://ssrn.com/abstract=1084977

Shankar Venkataraman

Georgia Institute of Technology ( email )

800, West Peachtree st., NW
Atlanta, GA 30308
United States
404-385-3106 (Phone)

Lisa Koonce (Contact Author)

University of Texas ( email )

Dept. of Accounting
McCombs School of Business
Austin, TX 78712
United States
512-471-5576 (Phone)
512-471-3904 (Fax)

D. Eric Hirst

University of Texas at Austin ( email )

CBA 4M.202 McCombs School of Business
Austin, TX 78712
United States
512-471-5565 (Phone)
512-471-3904 (Fax)

HOME PAGE: http://www.mccombs.utexas.edu/faculty/Eric.hirst/

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