Is Guidance a Macro Factor? the Nature and Information Content of Aggregate Earnings Guidance

53 Pages Posted: 4 Aug 2005  

Carol Anilowski Cain

Winston-Salem State University

Mei Feng

University of Pittsburgh - Katz Graduate School of Business

Douglas J. Skinner

The University of Chicago - Booth School of Business

Abstract

Although a great deal of research documents the information content of management earnings forecasts at the firm level, there is little research on the informativeness of aggregate earnings guidance. We argue that aggregate earnings guidance is potentially informative at the market/economy level through its effects on expectations about market-level expected future cash flows and expected returns. We find that aggregate guidance, especially relative levels of quarterly downward guidance, is associated with analyst- and time-series-based measures of aggregate earnings news. We also find some evidence that guidance - again, largely downward guidance - is associated with market returns.

Keywords: Earnings guidance, management earnings forecasts

JEL Classification: G12, G14, M41, G29

Suggested Citation

Anilowski Cain, Carol and Feng, Mei and Skinner, Douglas J., Is Guidance a Macro Factor? the Nature and Information Content of Aggregate Earnings Guidance. AAA 2005 FARS Meeting Paper; Journal of Accounting & Economics (JAE), Forthcoming. Available at SSRN: https://ssrn.com/abstract=572221

Carol Anilowski Cain

Winston-Salem State University

601 Martin Luther King, Jr. Dr.
RJR 130
Winston-Salem, NC 27110
United States

Mei Feng

University of Pittsburgh - Katz Graduate School of Business ( email )

Pittsburgh, PA 15260
United States

Douglas J. Skinner (Contact Author)

The University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-7137 (Phone)

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