The effects of analyst forecasts and earnings trends on perceptions of management forecast credibility |
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| Authors: | Lisa M Gaynor Andrea S Kelton |
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| Institution: | 1. School of Accountancy, University of South Florida, Tampa, FL, USA;2. Schools of Business, Wake Forest University, Winston‐Salem, NC, USA |
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| Abstract: | We examine whether analyst forecasts influence investors’ perceptions of the credibility of a good news management earnings forecast. We hypothesize that the effect of analyst forecasts will depend on whether the analyst forecast confirms management’s forecast and the extent to which management’s forecast is consistent with the prior earnings trend. Findings indicate that the positive effect of a confirming analyst forecast is greater when the management forecast is trend inconsistent than when it is trend consistent. The negative effect of a disconfirming analyst forecast does not differ based on management forecast trend consistency. |
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| Keywords: | Analyst forecast Management earnings forecast Disclosure credibility Investor expectations M41 |
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