Unsystematic Security Price Movements, Management Earnings Forecasts, and Revisions in Consensus Analyst Earnings Forecasts

Jennings, Robert H.

doi:10.2307/2491260

Cited by 254 publications

(161 citation statements)

References 8 publications

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“…I interact MGR and FIRM with news to examine whether investors respond more strongly per unit of forecast news for managers and firms with a stronger forecasting record. This specification is used in prior research to examine the credibility of forecasts (Jennings 1987;Williams 1996;Rogers and Stocken 2005;Hutton and Stocken 2009). A positive coefficient on FIRM*NEWS and MGR*NEWS indicates that the stock price reaction to forecast news is stronger for forecasts issued by managers and firms with greater prior forecasting accuracy, i.e., investors find these firms and managers to be more credible.…”

Section: Methodsmentioning

confidence: 99%

“…Prior research has examined the effect of overall management forecast credibility on both investors and analysts (Jennings 1987;Williams 1996;Rogers and Stocken 2005;Hutton and Stocken 2009). These studies predict and find that stock price reactions and analysts' forecast revisions to management forecasts vary with the magnitude of the forecast news and the credibility of the forecast.…”

Section: Management Forecast Credibilitymentioning

confidence: 99%

“…Following prior studies on forecast credibility, I measure forecast credibility as the stock price reaction per unit of forecast news (Jennings 1987;Williams 1996;Rogers and Stocken 2005;Hutton and Stocken 2009). This suggests that a manager's prior forecasting accuracy should 6 For example, analysts stated that Honeywell's newly appointed CEO David Cote is "in the credibility penalty box" and is "having a hard time getting his hands around the business" when the company failed to meet their earnings guidance in 2002.…”

Section: Management Forecast Credibilitymentioning

confidence: 99%

“…Following prior research allows me to examine whether managers and firms can build a reputation by issuing accurate forecasts (Williams 1996;Stocken 2000;Hutton and Stocken 2009). (Jennings 1987;Williams 1996;Rogers and Stocken 2005;Hutton and Stocken 2009), I measure forecast credibility as the stock price reaction to management forecast news. I first examine whether the market reaction is stronger for forecasts issued by managers with higher prior forecasting accuracy, and find that the market response to forecast news is positively associated with manager-specific forecasting accuracy.…”

Section: Introductionmentioning

confidence: 99%

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Capital Market Consequences of Managers’ Voluntary Disclosure Styles

Yang

2010

SSRN Journal

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This paper studies the capital market consequences of managers establishing an individual forecasting style. Using a manager-firm matched panel dataset, I examine whether and when manager-specific credibility matters. If managers' forecasting styles affect their perceived credibility, then the stock price reaction to forecast news should increase with managers' prior forecasting accuracy. Consistent with this prediction, I find that the stock price reaction to management forecast news is stronger when information uncertainty is high and when the manager has a history of issuing more accurate forecasts, indicating that individual managers benefit from establishing a personal disclosure reputation. This paper studies the capital market consequences of managers establishing an individual forecasting style. Using a manager-firm matched panel dataset, I examine whether and when manager-specific credibility matters. If managers' forecasting styles affect their perceived credibility, then the stock price reaction to forecast news should increase with managers' prior forecasting accuracy. Consistent with this prediction, I find that the stock price reaction to management forecast news is stronger when information uncertainty is high and when the manager has a history of issuing more accurate forecasts, indicating that individual managers benefit from establishing a personal disclosure reputation.

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Section: Methodsmentioning

confidence: 99%

Section: Management Forecast Credibilitymentioning

confidence: 99%

Section: Management Forecast Credibilitymentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Capital Market Consequences of Managers’ Voluntary Disclosure Styles

Yang

2010

SSRN Journal

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“…Although prior studies examine short-window market reactions (for example, Ajinkya and Gift 1984;Anilowski et al 2007;Han and Wild 1991;Hutton et al 2003;Pownall et al 1993) and analyst reactions (for example, Baginski and Hassell 1990;Jennings 1987) to management forecasts, investigating the impact of management forecasts and their characteristics on the FERC provides insights beyond those available from existing studies. Rather than assessing whether (and how) investors and analysts react to management forecasts, we ask whether these forecasts allow investors to adjust securities prices in a way that is consistent with future earnings realizations.…”

Section: )mentioning

confidence: 99%

Do management EPS forecasts allow returns to reflect future earnings? Implications for the continuation of management’s quarterly earnings guidance

et al. 2010

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Using 18,253 firm-year observations from 1998 through 2003, we build on literature suggesting that more informative disclosures allow returns to better reflect future earnings and test whether management earnings per share forecasts and their characteristics influence the future earnings response coefficient (FERC). We find that FERCs are greater for forecasting firms and when forecasts are more frequent or precise. We suggest that more frequent and more precise forecasts assist investors in better predicting future earnings. Importantly, we find that quarterly and short-term forecasts incrementally increase the association between returns and future earnings beyond annual and long-term forecasts; thus, even short-term, quarterly forecasts allow investors to form better expectations about future earnings. This suggests a benefit of quarterly earnings forecasts possibly overlooked in recommendations from the United States Chamber of Commerce, CFA Institute,

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Managing sustainability—Does the integration of environmental, social and governance key performance indicators in the internal management systems contribute to companies' environmental, social and governance performance?

et al. 2022

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Assessing whether a company is sustainable or not is challenging for investors. For this reason, it is particularly important how companies integrate and manage sustainability. This paper primarily aims to investigate the effects of implementing environmental, social and governance (ESG) key performance indicators (KPIs) in the internal management system (IMS) on ESG performance. Further, the effect of a consistent use of ESG KPIs in the IMS and the management compensation scheme (MCS) on ESG performance is examined. Using hand-collected data of the largest Germanlisted companies, this study employs t tests for differences in means and ordinary least square (OLS) regressions to study these associations. The results indicate that the implementation of ESG KPIs in the IMS increases ESG performance. In addition, the performance for environmental and social sub-dimensions is enhanced. No significant influence of a consistent use of ESG KPIs in the IMS and the MCS on ESG performance is observed. The results highlight that implementing ESG KPIs in the IMS is a practical approach to manage sustainability and to increase ESG performance. Our findings have practical and theoretical implications for researchers, regulators and companies considering the integration of sustainability and further communicating transparently and strengthening investor trust.

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Unsystematic Security Price Movements, Management Earnings Forecasts, and Revisions in Consensus Analyst Earnings Forecasts

Cited by 254 publications

References 8 publications

Capital Market Consequences of Managers’ Voluntary Disclosure Styles

Capital Market Consequences of Managers’ Voluntary Disclosure Styles

Do management EPS forecasts allow returns to reflect future earnings? Implications for the continuation of management’s quarterly earnings guidance

Managing sustainability—Does the integration of environmental, social and governance key performance indicators in the internal management systems contribute to companies' environmental, social and governance performance?

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