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What Do Management Earnings Forecasts Convey About the Macroeconomy?

53 Pages Posted: 8 Jan 2012 Last revised: 2 Jun 2014

Samuel B. Bonsall IV

Pennsylvania State University - Department of Accounting

Zahn Bozanic

Ohio State University (OSU) - Fisher College of Business

Paul E. Fischer

University of Pennsylvania - Accounting Department

Date Written: January 15, 2013

Abstract

We decompose quantitative management earnings forecasts into macroeconomic and firm-specific components to determine the extent to which voluntary disclosure provided by management has macroeconomic information content. We provide evidence that the forecasts of bellwether firms, which are defined as firms in which macroeconomic news explains the greatest amount of variation in the forecasts, provide timely information to the market about the macroeconomy when bundled with earnings announcements. Further, we show that bellwether firms provide timely information about both industry-specific events and broader economic events. Finally, we document that the macroeconomic news in individual forecasts is more pronounced for bad news and point forecasts.

Keywords: Voluntary disclosure, management earnings forecasts, bellwether firms, macroeconomic risk

JEL Classification: E44, G14, M41

Suggested Citation

Bonsall, Samuel B. and Bozanic, Zahn and Fischer, Paul E., What Do Management Earnings Forecasts Convey About the Macroeconomy? (January 15, 2013). Journal of Accounting Research, 2013, Vol. 51(2), 225-266. Available at SSRN: https://ssrn.com/abstract=1980195 or http://dx.doi.org/10.2139/ssrn.1980195

Samuel B. Bonsall IV

Pennsylvania State University - Department of Accounting ( email )

University Park, PA 16802-3306
United States

Zahn Bozanic (Contact Author)

Ohio State University (OSU) - Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

Paul E. Fischer

University of Pennsylvania - Accounting Department ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

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