Causes and Consequences of Disaggregating Earnings Guidance

Lansford, Benjamin; Lev, Baruch; Tucker, Jenny Wu

doi:10.2139/ssrn.1014240

Cited by 24 publications

(31 citation statements)

References 33 publications

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“…In addition, recent research shows that an increasing number of firms tend to issue management earnings forecasts together with their earnings announcements (e.g., Lansford, Lev, & Tucker, ; Merkley, Bamber, & Christensen, ; Rogers & Van Buskrik, ). As a result, to control for the possibility that management's earnings forecast decisions are affected by the issuance decisions of firms' earnings announcements, we create a separate sample of management earnings forecasts that includes only standalone, nonbundled earnings forecasts (i.e., a sample excluding all management earnings forecasts that were issued together with firms' earnings announcements) in examining the relation between commitment to higher levels of audited financial reporting and firms' management earnings forecast practices.…”

Section: Data Sample and Empirical Modelsmentioning

confidence: 99%

Audited financial reporting and voluntary disclosure: International evidence on management earnings forecasts

et al. 2018

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In this paper, we extend prior research on the link between audited financial reporting and voluntary disclosure by examining international differences in the relationship between commitment to higher levels of audit verification of actual financial outcomes and management earnings forecasts (our proxy for voluntary disclosure), using firm‐level data from 30 non‐US countries. Our evidence that commitment to higher levels of audit verification (proxied by the choice of a Big 4 auditor, the amount of audit fees, and excess audit fees) is positively associated with the incidence and frequency of management forecasts, and with stock market reactions to such forecasts, supports the notion that audited financial reporting and voluntary disclosure of managers' private information are complements in countries around the world. We further find that the relation between audited financial reporting and management earnings forecasts is weaker for firms in countries with relatively stronger capital market development or with higher levels of investor protection, suggesting that audited financial reporting plays a more important complementary role in voluntary disclosure in countries with less‐developed institutions. Overall, our findings suggest that firm‐level commitment to better audited financial reporting and the strength of country‐level institutional characteristics play substitute roles in corporate voluntary disclosure decisions.

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Section: Data Sample and Empirical Modelsmentioning

confidence: 99%

Audited financial reporting and voluntary disclosure: International evidence on management earnings forecasts

et al. 2018

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“…Chen, DeFond, and Park (2002) find that after firms start to include balance-sheet data in their earnings announcement press releases, two thirds of the firms continue to do so. Lansford, Lev, and Tucker (2013) report that firms largely continue their practices of either disaggregating MEF or not disaggregating it in the subsequent year. If firms deviate from past practices, the change is a signal to investors.…”

Section: Temporal Variationmentioning

confidence: 99%

The relation between disclosure quality and reporting quality: A discussion of Cassell, Myers, and Seidel (2015)

Tucker

2015

Accounting, Organizations and Society

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“…For firm-quarters in which a management forecast is issued, we set the measurement date as the earlier of either the day immediately preceding the issuance of the first management forecast for the quarter or the day before the previous quarter's earnings announcement. Measurement date is used to exclude the effect of previously issued management forecasts on the properties of analysts' forecasts and to mitigate problems related to the possible omission of management forecasts made during conference calls from First Call (Lansford et al 2010). For firm-quarters in which a management forecast is not issued, the measurement date is randomly assigned based on the distribution of the measurement dates used for the firm-quarters with management forecasts.…”

Section: Data and Sample Selectionmentioning

confidence: 99%

Anticipation of management forecasts and analysts’ private information search

2014

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We examine how analysts' anticipation of a management forecast affects their search for private information. Analysts are likely to acquire more private information because of the potential gains from trading on that information before a publicly disclosed management forecast. However, this anticipation may also decrease analysts' efforts, because the information in a management forecast could substitute for costly private information. We predict that higher costs (benefits) of private information acquisition are associated with decreased (increased) private information reflected in analysts' forecasts when a management forecast is anticipated. Consistent with our predictions, we find that analysts acquire less private information before an anticipated forecast when earnings are more volatile and that they acquire more private information when the management forecast date is highly predictable and when the forecast is expected to be very accurate. We also find that star analysts acquire more private information before an anticipated forecast.

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Causes and Consequences of Disaggregating Earnings Guidance

Cited by 24 publications

References 33 publications

Audited financial reporting and voluntary disclosure: International evidence on management earnings forecasts

Audited financial reporting and voluntary disclosure: International evidence on management earnings forecasts

The relation between disclosure quality and reporting quality: A discussion of Cassell, Myers, and Seidel (2015)

Anticipation of management forecasts and analysts’ private information search

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