A literature synthesis of experimental studies on management earnings guidance

Abstract

Researchers have long been interested in understanding why and how corporate managers issue earnings guidance and the effect of such guidance on stakeholders' (investors' and managers') behavior. Several recent studies have employed the experimental approach to address these issues. The purpose of this paper is to analyze and synthesize the literature on experimental studies of management earnings guidance. Consistent with the literature, I organize the synthesis to reflect (a) whether, why and how management issues guidance; (b) investors' reactions to guidance; (c) the effect of guidance on management behavior. In addition, I provide institutional information (e.g., nature and timing of guidance) about guidance as well as provide several directions for future research. The synthesis reveals that the experimental studies have made a unique contribution to this literature by (i) providing evidence on process variables that underlie some empirical associations, (ii) directly measuring managers' personal attributes and, (iii) closing the causality gap in the guidance literature.

Executive shareholding, compensation, and analyst forecast of Chinese firms

“…Since the average number of institutional forecasts for calculating the consensus expectations is 6, we follow Huang and Wright (2015) and Huang (2016) by adopting a "range" measure of forecast dispersion rather than a standard deviation measure. The use of this type of "range" in forecasts as proxy for information asymmetry and earnings uncertainty is common in the literature on company earnings forecast (see Han, 2013 for a review of this literature). Using price deflated error and dispersion measures is consistent with Truong (2011) and Huang and Wright (2015) thus avoiding problems associated with negative earnings compared to alternative measures scaled by realized earning.…”

The Joint Effect of Accounting Knowledge and Self-serving Attribution on the Voluntary Disclosure of Management Earnings Forecast

“…These disclosures are related to the firm's expected performance, before the actual performance announcement is made (King, Pownall, & Waymire, 1990). Studies (Han, 2013;Hirst, Koonce, & Venkataraman, 2008;King et al, 1990) found that the number of management earnings forecasts issued by public companies had increased conspicuously with divergent contents and diverse timing (Kothari, Shu, & Wysocki, 2009;Miller, 2002;Skinner, 1994). Similarly, management earnings forecasts have been the focus of academic research for decades (e.g., Rogers & Stocken, 2005;Bozanic, Roulstone, & Van Buskirk, 2018).…”

Influência Da Divulgação Do Guidance Nas Escolhas Contábeis E Gerenciamento De Resultados: Um Estudo De Dados Em Painel Com Companhias Do Ibovespa

“…Mesmo com as orientações de agentes do mercado de capitais, como CODIM e CVM, a divulgação do guidance é circunstanciada de prós e contras. As projeções são associadas a menor volatilidade das ações, maior confiança e aproximação com os profissionais do mercado, aumento da cobertura da empresa, ação mais próxima do preço justo, redução do custo de capital e alinhamento de projeções (Anhalt, 2007;Han, 2013;Hirst, Koonce, & Venkataraman, 2008). Entretanto, divulgadores do guidance investem menos em pesquisa e desenvolvimento, as taxas de crescimento de longo prazo são menores e, em geral, as empresas que evidenciam guidance têm perspectiva de curto prazo para os lucros (Cheng, Subramanyam, & Zhang, 2005;Mahoney, 2008), uma vez que, as previsões de lucros aumentam a volatilidade das ações a curto prazo, principalmente, quando são esporádicas (Agapova & Madura, 2016).…”