Meeting or Beating Management Forecasts: Implications for Managerial Talent

50 Pages Posted: 1 Dec 2015

See all articles by Kai Wai Hui

Kai Wai Hui

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

Shiheng Wang

Hong Kong University of Science & Technology (HKUST)

Yao Zhang

Tong Ji University - Accounting Department

Date Written: November 30, 2015

Abstract

This study explores whether meeting or beating management forecasts is indicative of managerial talent. We find that the market reacts positively when firms meet or beat their management forecasts after controlling for meeting or beating analyst forecasts and management forecast errors. Further analyses reveal that firms meeting or beating management forecasts perform better in the future and are more likely to retain their CEOs. These findings suggest that meeting or beating management forecasts provides information on managerial talent, which is valued by investors. Next, we examine when management forecasts are distinct from analyst forecasts with respect to their indication of managerial talent. We find that the market premiums from meeting or beating management forecasts are positively associated with both firm-specific uncertainty and managers’ firm-specific information advantages, while the market premiums from meeting or beating analyst forecasts are positively associated with analysts’ macro-level information advantages.

Keywords: Meeting or beating; management forecasts; market premiums; future performance

JEL Classification: M41; G14; D82

Suggested Citation

Hui, Kai Wai and Wang, Shiheng and Zhang, Yao, Meeting or Beating Management Forecasts: Implications for Managerial Talent (November 30, 2015). Available at SSRN: https://ssrn.com/abstract=2697013 or http://dx.doi.org/10.2139/ssrn.2697013

Kai Wai Hui (Contact Author)

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

Pokfulam Road
Hong Kong, Pokfulam
Hong Kong

Shiheng Wang

Hong Kong University of Science & Technology (HKUST) ( email )

Clear Water Bay
Kowloon, 999999
Hong Kong
(852) 2358 7570 (Phone)
(852) 2358 1693 (Fax)

Yao Zhang

Tong Ji University - Accounting Department ( email )

100 Wudong Road
Shanghai 200433
China

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