The Effect of Lender Expectations Management on Mandatory Management Forecasts: Evidence from Cash Flow Forecasts by Early-Stage Mining Firms

62 Pages Posted: 2 Jun 2019 Last revised: 28 Apr 2021

See all articles by Andrew Ferguson

Andrew Ferguson

Department of Accounting, UTS

Gabriel Pundrich

University of Florida

Date Written: August 21, 2020

Abstract

The objective of this study is to investigate whether management forecasts characteristics change around key debt financing events to meet expectations of debt holders. 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

Ferguson, Andrew and Pundrich, Gabriel, The Effect of Lender Expectations Management on Mandatory Management Forecasts: Evidence from Cash Flow Forecasts by Early-Stage Mining Firms (August 21, 2020). Available at SSRN: https://ssrn.com/abstract=3382942 or http://dx.doi.org/10.2139/ssrn.3382942

Andrew Ferguson (Contact Author)

Department of Accounting, UTS ( email )

PO Box 123 Broadway
Sydney, NSW 2007
Australia
61 2 9514 3565 (Phone)

Gabriel Pundrich

University of Florida ( email )

PO Box 117165, 201 Stuzin Hall
Gainesville, FL 32610-0496
United States

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