What Do Management Earnings Forecasts Convey About the Macroeconomy?

Bonsall, Samuel B.; Bozanic, Zahn; Fischer, Paul E.

doi:10.1111/1475-679x.12007

Cited by 143 publications

(62 citation statements)

References 62 publications

(102 reference statements)

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“…In addition, we find that volatility risk premiums are concentrated among bellwether firms, i.e., firms that tend to convey more news about the macroeconomy (Anilowski, Feng, and Skinner 2007;Bonsall, Bozanic, and Fischer 2013). We find no evidence of a significant positive relation between nondiversifiable volatility risk and risk premiums for randomly assigned pseudo earnings announcement dates, which confirms that our inferences depend on earnings news.…”

Section: Non-diversifiable Volatility Risk and Risk Premiums At Earnisupporting

confidence: 59%

“…Following Bonsall, Bozanic, and Fischer (2013), the second is BELLWETHER, which equals one for firms in the upper quartile of firms in terms of the macroeconomic content of their earnings surprises, and zero otherwise. 17 We use these four variables as alternatives for COMOVE in equation (3), and omit the three control variables.…”

Section: Alternative Measures Of Non-diversifiable Volatility Riskmentioning

confidence: 99%

“…Table 6 supports our inferences that some earnings announcements pose non-diversifiable volatility risk and investors pay premiums for options that hedge volatility risk at earnings announcements. 17 We calculate BELLWETHER following the two-stage firm-specific regression procedure in Bonsall, Bozanic, and Fischer (2013), but applied to earnings surprises rather than earnings forecasts. In the first stage, we estimate regressions of earnings, scaled by assets, on a vector of lagged macroeconomic forecasts from the Federal Reserve Bank of Philadelphia's Survey of Professional Forecasts to obtain fitted values of the firm's earnings based on the forecasts and residuals.…”

Section: Alternative Measures Of Non-diversifiable Volatility Riskmentioning

confidence: 99%

“…§ BELLWETHER is an indicator variable that equals one for firms in the upper quartile of firms in terms of the macroeconomic content of their earnings surprises, calculated following Bonsall, Bozanic, and Fischer (2013), and zero otherwise. § COMOVE q is the difference in co-movement of the firm's equity return volatility and the equity market return volatility between earnings announcement days and non-announcement days.…”

Section: Appendix Bmentioning

confidence: 99%

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Non-Diversifiable Volatility Risk and Risk Premiums at Earnings Announcements

Barth

2014

The Accounting Review

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This study seeks to determine whether earnings announcements pose non-diversifiable volatility risk that commands a risk premium. We find that investors anticipate some earnings announcements to convey news that increases market return volatility and pay a premium to hedge this non-diversifiable risk. In particular, we find evidence of risk premiums embedded in prices of firms' traded options that are significantly positively associated with the extent to which the firms' earnings announcements pose non-diversifiable volatility risk. In addition, we find that volatility risk premiums are concentrated among bellwether firms and result in predictable variation in option straddle returns around earnings announcements. Taken together, our findings show that some earnings announcements pose non-diversifiable volatility risk that commands a risk premium. JEL Classifications: M41; G12; G13; G14

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Section: Non-diversifiable Volatility Risk and Risk Premiums At Earnisupporting

confidence: 59%

Section: Alternative Measures Of Non-diversifiable Volatility Riskmentioning

confidence: 99%

Section: Alternative Measures Of Non-diversifiable Volatility Riskmentioning

confidence: 99%

Section: Appendix Bmentioning

confidence: 99%

See 2 more Smart Citations

Non-Diversifiable Volatility Risk and Risk Premiums at Earnings Announcements

Barth

2014

The Accounting Review

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“…Finally, Bonsall, Bozanic, and Fischer (2013) suggests that management forecasts contain macroeconomic information. However, Bonsall at al.…”

Section: Thementioning

confidence: 99%

Bias and the Commitment to Disclosure

Heinle

Verrecchia

2016

Management Science

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This paper studies the propensity of firms to commit to disclose information that is subsequently biased, in the presence of other firms also issuing potentially biased information. An important aspect of such an analysis is the fact that firms can choose whether to disclose or withhold information. We show that allowing the number of disclosed reports to be endogenous introduces a countervailing force to some of the empirical predictions from the prior literature. For example, we find that as more firms issue reports or as the correlation across firms' cash flows increases, the firm biases its report less. However, when we treat firms' disclosure choices as endogenous, we show that the number of firms that commit to disclose decreases as the correlation across these cash flows increases, and this, in turn, offsets the direct effect of the correlation on bias. AbstractThis paper studies the propensity of …rms to commit to disclose information that is subsequently biased, in the presence of other …rms also issuing potentially biased information. An important aspect of such an analysis is the fact that …rms can choose whether to disclose or withhold information. We show that allowing the number of disclosed reports to be endogenous introduces a countervailing force to some of the empirical predictions from the prior literature. For example, we …nd that as more …rms issue a report or as the correlation across …rms' cash ‡ows increases, the …rm biases its report less. However, when we treat …rms' disclosure choices as endogenous, we show that the number of …rms that commit to disclose decreases as the correlation across these cash ‡ows increases, and this, in turn, o¤sets the direct e¤ect of the correlation on bias.

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Accounting‐based variables as an early warning indicator of financial distress in crisis and non‐crisis periods

Powell

Dinh

et al. 2023

Int. J Fin Econ

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Financial integration in the Association of Southeast Asian Nations (ASEAN) region is a key focus of the ASEAN Economic Community. Whereas many studies focus on modelling corporate default, this paper identifies early warning indicators of financial distress before a default, using multiple discriminant analysis (MDA) models with a sample of listed and delisted companies in the ASEAN region. The analysis examines 720 companies in 10 different industries across six ASEAN countries from 1997 to 2016. The study constructs individual models for each country as well as an overall model for the entire region, using both in‐sample and out‐of‐sample approaches. This overall model could be useful for an integrated banking system. To ensure robustness, the study also separately examines the predictive performance of the MDA models across different economic crises: the Asian financial crisis (AFC) from 1997 to 2000, the global financial crisis (GFC) from 2007 to 2009 and their pre‐ and post‐crisis periods. We find that profitability ratios are the best indicators of financial distress in the ASEAN region, followed by liquidity and leverage ratios. In addition, our findings reveal common indicators that can be used to predict financial distress across ASEAN countries. The single model performs reasonably well in predicting financial distress 1 year ahead. In addition, the model is extended to incorporate a market‐based indicator into the MDA models, the distance to default. However, the inclusion of this indicator does not significantly improve the accuracy of the models in predicting financial distress at listed firms in the ASEAN region.

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What Do Management Earnings Forecasts Convey About the Macroeconomy?

Cited by 143 publications

References 62 publications

Non-Diversifiable Volatility Risk and Risk Premiums at Earnings Announcements

Non-Diversifiable Volatility Risk and Risk Premiums at Earnings Announcements

Bias and the Commitment to Disclosure

Accounting‐based variables as an early warning indicator of financial distress in crisis and non‐crisis periods

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