58 Pages Posted: 15 Aug 2012 Last revised: 2 Jul 2015
Date Written: July 1, 2015
Management earnings forecasts have been the overwhelming focus of prior research on forward-looking disclosure, but represent only a small fraction of forward-looking statements made by managers. We use textual analysis to first identify forward-looking statements and then distinguish between “forecast-like” statements (quantitative statements referring explicitly to earnings) and “other” forward-looking statements that have been largely ignored by existing research. These other forward-looking statements are consequential: they are associated with significant investor and analyst responses. Moreover, the decision to issue these other forward-looking statements differs from the decision to issue the typically-studied earnings forecast. While managers issue fewer forecast-like statements during periods of high uncertainty, the opposite is true for other forward-looking statements. We test explanations for this behavior and conclude that managers value the controllability of non-earnings forward-looking statements more than they fear the ex post verifiability of quantitative projections. Overall, our results indicate that other forward-looking statements represent an important and under-studied component of firm disclosures and are distinct from traditionally-studied earnings forecasts.
Keywords: Earnings Announcements, Voluntary Disclosure, Management Forecasts, Qualitative Disclosures
JEL Classification: D8, M4
Suggested Citation: Suggested Citation
Bozanic, Zahn and Roulstone, Darren T. and Van Buskirk, Andrew, Management Earnings Forecasts and Other Forward-Looking Statements (July 1, 2015). Available at SSRN: https://ssrn.com/abstract=2130145 or http://dx.doi.org/10.2139/ssrn.2130145
By Ray Ball