Managerial Learning from Analyst Feedback to Voluntary Capex Guidance, Investment Efficiency and Firm Performance

78 Pages Posted: 5 Jun 2016 Last revised: 13 Jul 2020

See all articles by Jihun Bae

Jihun Bae

Erasmus University Rotterdam

Gary C. Biddle

University of Melbourne - Faculty of Business and Economics; Columbia Business School; HKU Business School; London Business School

Chul W. Park

The University of Hong Kong - School of Business

Date Written: July 11, 2020

Abstract

We test predictions as modeled in Langberg and Sivaramakrishnan (2010) that managers issuing voluntary capex guidance learn from analyst feedback and that this learning serves to enhance investment efficiency and firm performance, with three main findings. First, consistent with managerial learning from analyst feedback, we find that both managerial capex guidance forecast errors and managerial capex guidance revisions relate positively with differences between post-guidance analyst capex forecasts and managerial capex guidance. Second, consistent with investment efficiency being enhanced by managerial learning from analyst feedback, we find that investment efficiency changes relate positively with deviations of post-guidance analyst capex forecasts from managerial capex guidance. Third, consistence with managerial learning that enhances firm performance, we find that subsequent firm financial performance relates positively with both predicted values of managerial forecast errors and managerial guidance revisions. Additional analyses of conference call analyst capex question tone, a conditional investment model, analyst characteristics and robustness lend support to these findings. This evidence consistent with managerial learning from analyst feedback to voluntary disclosures that enhances investment efficiency and firm performance extends prior findings regarding investment efficiency sources and helps to explain active voluntary guidance issuance in settings as for capex where the potential for managerial learning from share price effects is limited, as we also explain.

Keywords: Voluntary guidance, analyst feedback, managerial learning, investment efficiency, firm performance

JEL Classification: M41

Suggested Citation

Bae, Jihun and Biddle, Gary C. and Park, Chul Won, Managerial Learning from Analyst Feedback to Voluntary Capex Guidance, Investment Efficiency and Firm Performance (July 11, 2020). Available at SSRN: https://ssrn.com/abstract=2788381 or http://dx.doi.org/10.2139/ssrn.2788381

Jihun Bae

Erasmus University Rotterdam ( email )

Burgemeester Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Gary C. Biddle

University of Melbourne - Faculty of Business and Economics ( email )

Level 8, 198 Berkeley Street
Carlton, VIC 3010
Melbourne, Victoria 3010
Australia
61-3-8344-9807 (Phone)
61-3-9349-2397 (Fax)

Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

HKU Business School ( email )

00000
Hong Kong

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

Chul Won Park (Contact Author)

The University of Hong Kong - School of Business ( email )

Meng Wah Complex
Pokfulam Road
Hong Kong
China
+852-2859-1081 (Phone)

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