The Rewards for Meeting or Beating Managers’ Own Earnings Forecasts

Hui, K. W., Liu, A. Z., & Zhang, Y. (2021). The rewards to meeting or beating managers’ own earnings forecasts. Accounting Horizons 35(1): 87-103.

53 Pages Posted: 10 Oct 2013 Last revised: 5 Jan 2022

See all articles by Kai Wai Hui

Kai Wai Hui

The University of Hong Kong (HKU) - Department of Accounting

Alfred Z. Liu

University at Albany, SUNY

Yao Zhang

Tong Ji University - Accounting Department

Date Written: October 1, 2018

Abstract

This study documents a stock return premium for meeting or beating management’s own earnings forecasts (MBMF) that is separate and distinct from the premium for meeting or beating analysts’ earnings forecasts (MBAF) documented in prior literature. Cross-sectional analyses reveal that the MBMF premium relative to the MBAF premium increases when management forecasts are historically more accurate and are released closer to earnings announcement dates. We also find that MBMF is incrementally informative about a firm’s future performance, CEO turnover, and forecast accuracy after considering MBAF. Our findings suggest that investors consider management earnings forecasts as an additional performance metric, along with analyst earnings forecasts, when forming earnings expectations.

Suggested Citation

Hui, Kai Wai and Liu, Alfred and Zhang, Yao, The Rewards for Meeting or Beating Managers’ Own Earnings Forecasts (October 1, 2018). Hui, K. W., Liu, A. Z., & Zhang, Y. (2021). The rewards to meeting or beating managers’ own earnings forecasts. Accounting Horizons 35(1): 87-103., Available at SSRN: https://ssrn.com/abstract=2337959 or http://dx.doi.org/10.2139/ssrn.2337959

Kai Wai Hui (Contact Author)

The University of Hong Kong (HKU) - Department of Accounting ( email )

Pokfulam Road
Hong Kong, Pokfulam
Hong Kong

Alfred Liu

University at Albany, SUNY ( email )

Albany, NY 12222
United States

Yao Zhang

Tong Ji University - Accounting Department ( email )

100 Wudong Road
Shanghai 200433
China

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