Consistency in meeting or beating earnings expectations and management earnings forecasts |
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| Authors: | William J Kross Byung T Ro Inho Suk |
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| Institution: | 1. School of Management, SUNY at Buffalo, Buffalo, NY 14260, USA;2. Krannert School of Management, Purdue University, West Lafayette, IN 47907, USA;3. School of Business, Yonsei University, Seoul, Korea;1. School of Management, Zhejiang University, China;2. North Industrial Company, Beijing, China;3. Freeman School of Business, Tulane University, USA;1. New York University, Stern School of Business, United States;2. Columbia University, Graduate School of Business, United States;1. University of Exeter Business School, Rennes Drive, Exeter, Devon EX4 4PU, United Kingdom;2. Harvard Business School, 381 Morgan Hall, Boston, MA 02127, United States;3. China Europe International Business School, 699 Hongfeng Road, Pudong Xinqu, Shanghai Shi, China;1. Johnson Graduate School of Management, Cornell University, Ithaca, NY 14853, USA;2. Interdisciplinary Center, Herzelia, 4610101, Israel;3. Beedie School of Business, Simon Fraser University, Burnaby, BC V5A 1S6, Canada;1. Stern School of Business, New York University, United States;2. Rutgers Business School, Rutgers University, United States |
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| Abstract: | This paper provides evidence that firms that have consistently met or beaten analysts’ earnings expectations (MBE) provide more frequent “bad news” management forecasts than firms with no established string of MBE, particularly when existing analyst forecasts are optimistic. This suggests that firms with a consistent MBE record are more likely to guide analysts’ expectations downward to avoid breaking the consistency. Subsequent analyst forecast revisions following bad news management forecasts issued by these firms are dampened, implying that analysts suspect that these forecasts may be opportunistic. The relation between management forecasts and MBE consistency is stronger after Regulation FD. |
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