Consistency in Meeting or Beating Earnings Expectations and Management Earnings Forecasts

Posted: 21 Jun 2011 Last revised: 2 Jul 2011

See all articles by William Kross

William Kross

State University of New York (SUNY) at Buffalo - Department of Accounting

Byung T. Ro

Purdue University - Krannert School of Management

Inho Suk

State University of New York (SUNY) at Buffalo - School of Management

Date Written: June 17, 2011

Abstract

This paper provides evidence that firms that have consistently met or beaten analysts’ earnings expectations (MBE) provide more frequent “bad news” management forecasts than firms with no established string of MBE, particularly when existing analyst forecasts are optimistic. This suggests that firms with a consistent MBE record are more likely to guide analysts’ expectations downward to avoid breaking the consistency. Subsequent analyst forecast revisions following bad news management forecasts issued by these firms are dampened, implying that analysts suspect that these forecasts may be opportunistic. The relation between management forecasts and MBE consistency is stronger after Regulation FD.

Suggested Citation

Kross, William and Ro, Byung T. and Suk, Inho, Consistency in Meeting or Beating Earnings Expectations and Management Earnings Forecasts (June 17, 2011). Journal of Accounting & Economics (JAE), Vol. 51, 2011. Available at SSRN: https://ssrn.com/abstract=1866375

William Kross

State University of New York (SUNY) at Buffalo - Department of Accounting ( email )

Buffalo, NY 14260
United States

Byung T. Ro

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States
765-494-4512 (Phone)
765-494-9658 (Fax)

Inho Suk (Contact Author)

State University of New York (SUNY) at Buffalo - School of Management ( email )

342 Jacobs Management Center
Buffalo, NY 14260-4000
United States
716-645-3215 (Phone)

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