Mandatory Management Forecasts and Lender Expectations Management
61 Pages Posted: 2 Jun 2019 Last revised: 24 Mar 2020
Date Written: March 23, 2020
The objective of this study is to investigate whether management forecasts characteristics change around key debt financing events. Examining a large sample of mandatory management forecasts of quarterly expenditure disclosed by early-stage mining companies, we find project finance approval results in managers increasing overestimates of cash outflows or creating ‘budget slack.’ This is consistent with managers using forecasts to ‘underpromise and overdeliver’ during project development.
Keywords: mandatory management forecasts, project finance, expectations management
JEL Classification: G32
Suggested Citation: Suggested Citation