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An Empirical Analysis of Qualitative Management Earnings Forecasts

21 Pages Posted: 2 Feb 2011  

Michael Ofosu Mensah

affiliation not provided to SSRN

Hong V. Nguyen

University of Scranton

Huldah A. Ryan

affiliation not provided to SSRN

Date Written: June 28, 2008

Abstract

Despite efforts by the Securities and Exchange Commission (SEC) to encourage corporate disclosure of quantitative management earnings projections, only a small fraction of firms voluntarily do so. Instead of quantitative estimates, a large number of firms choose to disclose qualitative (verbal) assessments of their earnings prospects. This paper is a study of the information characteristics and the usefulness of this alternative form of forecast disclosure to investors. The study examines a sample of qualitative forecast statements from the 19791985 period and finds associations between these forecasts and percentage changes in realized earnings per share, the direction of financial analysts' forecast revisions following the disclosure of these forecasts, and abnormal stock returns on the date of their disclosure. These associations are, however, shown to be more significant for negative (bad news) than for positive (good news) forecasts.

Keywords: management forecasts, qualitative statements, usefulness, analysts' forecast revisions, forecast accuracy

Suggested Citation

Mensah, Michael Ofosu and Nguyen, Hong V. and Ryan, Huldah A., An Empirical Analysis of Qualitative Management Earnings Forecasts (June 28, 2008). Journal of Business Finance & Accounting, Vol. 23, Issue 9-10, pp. 1245-1265, 2008. Available at SSRN: https://ssrn.com/abstract=1753443 or http://dx.doi.org/10.1111/1468-5957.00078

Michael Ofosu Mensah (Contact Author)

affiliation not provided to SSRN

No Address Available

Hong V. Nguyen

University of Scranton ( email )

320 Madison Avenue
Scranton, PA 18510
United States

Huldah A. Ryan

affiliation not provided to SSRN

No Address Available

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