Once Is Not Enough: Properties and Implications of Management Forecast Updates

56 Pages Posted: 20 Aug 2014 Last revised: 27 Jun 2016

See all articles by Michael (Minye) Tang

Michael (Minye) Tang

New York University (NYU)

Li Yao

Concordia University, Quebec

Paul Zarowin

New York University (NYU) - Department of Accounting

Date Written: June 23, 2016

Abstract

About half of managers’ forecasts of annual earnings issued in recent years are updated regularly (i.e., updated every quarter), while only about 10% are not updated. Consistent with the dynamic disclosure theory that anticipation of future updates can affect earlier disclosure choices, we find that the properties of initial forecasts and earlier updates vary systematically with future updates. Most of regular updaters’ initial forecasts are pessimistic and revised upward subsequently. In contrast, non-updaters tend to issue optimistic initial forecasts, consistent with prior findings on managers’ long-horizon forecasts. Analysts appear to recognize the differential biases in initial forecasts and react less strongly to initial bad news forecasts from regular updaters than from other firms. Moreover, regular updaters are more (less) timely in disclosing bad (good) news to the market than other firms, consistent with regular updates facilitating timely release of bad news. Our findings suggest that updates are important in management forecast research.

Keywords: Management Forecasts, Forecast Updates, Analyst Revisions

JEL Classification: M41

Suggested Citation

Tang, Michael and Yao, Li and Zarowin, Paul, Once Is Not Enough: Properties and Implications of Management Forecast Updates (June 23, 2016). Available at SSRN: https://ssrn.com/abstract=2482685 or http://dx.doi.org/10.2139/ssrn.2482685

Michael Tang (Contact Author)

New York University (NYU) ( email )

Henry Kaufman Management Center
44 West 4th Street - Suite 10-84
New York, NY 10012-1126
United States
(212) 998-0087 (Phone)
(212) 995-4004 (Fax)

Li Yao

Concordia University, Quebec ( email )

1455 de Maisonneuve Blvd. W.
Montreal, Quebec H3G 1MB
Canada

Paul Zarowin

New York University (NYU) - Department of Accounting ( email )

40 West 4th Street, Suite 400
422 Tisch Hall
New York, NY 10012-1118
United States
212-998-0015 (Phone)
212-995-4004 (Fax)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
229
Abstract Views
1,119
rank
141,230
PlumX Metrics