Do Management Earnings Forecasts Incorporate Information in Earnings’ Components? Evidence from the Tunisian Context

Abstract

The aim of this paper is to explain the management earnings forecast errors of Tunisian listed firms and examine whether the management earnings forecasts reflect fully the implications of the two components accruals and cash flows of current earnings for the future earnings. Using a sample of Tunisian non-financial firms over the period 2009-2018, the Hausman test result advocates choosing the fixed effects models to determine which information from mandatory disclosures, can explain the management earnings forecast errors in listed Tunisian firms. Our results indicate a negative and significant association between management earnings forecast errors and cash flows component but the effect of the accruals component on management forecast errors is not statistically significant. These results show that managers estimate correctly the accruals persistence but underestimate the cash flows persistence.

The Association between Management Earnings Forecast Deviation, Earnings Management, and the Stock Prices: Evidence from the Emerging Markets

“…Moreover, Gong et al (2009) reported more association with total accrual. Our results are not consistent with Boubakri, F., (2020) who found insignificant association between management forecast errors and accruals. Our interpretation for this contradictory result, as this study conducted at Tunisian context on small sample including and data starting from 2009, as management earnings forecasts was not stable.…”