Consistency in Management Earnings Guidance Patterns

50 Pages Posted: 12 Nov 2011 Last revised: 4 Feb 2020

Date Written: February 3, 2020

Abstract

I examine management earnings guidance patterns, measured by the specific quarters in which a firm issues guidance each year. Using a constant sample, I document that a large and increasing percentage of firms provide guidance in consistent patterns over consecutive years, suggesting that the benchmark of their current guidance provision should be their prior guidance, not no-guidance as assumed in prior studies that focus on guidance levels. I study changes in guidance provision to recognize firms’ prior guidance as their benchmark. Controlling for known guidance determinants, I find that firms with consistent (but not necessarily frequent) past guidance act more like regular guiders—their subsequent guidance provisions are less likely to change and are less sensitive to guidance determinants. While prior studies commonly use guidance frequency to identify regular guiders, my findings suggest that the consistency in guidance patterns can refine this identification significantly.

Keywords: Earnings guidance, Management earnings forecast, Voluntary disclosure, Guidance consistency

JEL Classification: M41

Suggested Citation

Tang, Michael, Consistency in Management Earnings Guidance Patterns (February 3, 2020). International Journal of Accounting, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1952804 or http://dx.doi.org/10.2139/ssrn.1952804

Michael Tang (Contact Author)

New York University (NYU) ( email )

Henry Kaufman Management Center
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New York, NY 10012-1126
United States
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