Management Forecast Revisions and Their Long-Run Effects on Analyst Forecasts
22 Pages Posted: 21 Aug 2014
Date Written: August 19, 2014
Management forecasts in Chinese share market are mostly mandatory, accompanied by many revisions to original forecasts. This paper describes the phenomenon of management forecast revisions and examines their long-run effects on analyst forecasts. We found that the revisions are almost evenly distributed among good news and bad news, but the revisions with bad news occur significantly later than those with good news. Meanwhile, the precision of revisions is significantly higher than that of original forecasts. The revisions affect management’s reputation of credible disclosure in that analysts update less to subsequent management forecasts with revisions in prior years. Further analysis shows that analysts’ consideration to revisions in prior years is sensible.
Keywords: Management forecast; Revisions; Analyst forecast; Market reaction
JEL Classification: M41
Suggested Citation: Suggested Citation