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

Abstract

We test predictions that managers issuing voluntary capex guidance learn from analyst feedback
and that this learning enhances investment efficiency and firm performance (Langberg and
Sivaramakrishnan, 2010). Our findings are consistent with these predictions. First, we find that
managers’ capex adjustments and capex guidance revisions relate positively with analyst feedback
measured by differences between post-guidance analyst capex forecasts and managerial capex
guidance. Second, changes in investment efficiency relate positively with analyst feedback. Third,
subsequent firm financial performance relates positively with the predicted values of both
managers’ capex adjustments and capex guidance revisions. These findings extend prior evidence
regarding sources of managerial learning and investment efficiency and help to explain the active
issuance of voluntary guidance by managers in settings where, as for capex guidance, the potential
for managerial learning from related share price effects is limited.

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

JEL Classification: M41