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
Date Written: July 11, 2020
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: Suggested Citation