Disappearing EPS Guidance?

Abstract

The proportion of US firms in I/B/E/S that issue EPS guidance falls from 49% in 2002 to 24% in 2023. This decline is driven by “cohort effects” (i.e., each five-year cohort of newly listed firms has fewer EPS guiders than its predecessor). Notably, the proportions of EPS guiders in the five cohorts since 2000 are 36%, 28%, 22%, 13% and 5%, respectively. We find that these cohorts are progressively more represented by weak firms with poorer performance (i.e., higher left-skewness in profitability) and high growth firms with more distant payoffs (i.e., higher right-skewness in intangibles investments), both of which contribute to the decline. The impact of weak firms is distinct from that of reporting a loss and that of the skewness in accruals (i.e., accounting conservatism).

Keywords: Guidance, Voluntary Disclosure, New Listing, Profitability, Assets Growth, Intangibles Growth

JEL Classification: D80, D82, G14, G17, M40, M41