What Do Management Earnings Forecasts Convey About the Macroeconomy?
53 Pages Posted: 8 Jan 2012 Last revised: 2 Jun 2014
Date Written: January 15, 2013
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: Suggested Citation