Managers’ Forecasting Track Records and the Credibility of Earnings Guidance: Evidence from Analyst Forecast Revisions​

We examine whether the perceived credibility of management earnings forecasts (management guidance), as measured by analysts’ forecast revisions following the issuance of management forecasts, is influenced by the forecasting track records of individual managers. Results indicate that analysts’ reaction to management forecasts is conditioned by both manager- and firm-specific prior forecast performance, suggesting that analysts consider both manager- and firm-specific characteristics in their assessments of management guidance. We further present consistent evidence that the association between analyst response to current ‘good news’ guidance and managers’ forecasting track record is stronger for analysts with greater firm-specific forecasting experience, and those who have previously achieved All-Star status. We also report evidence that analysts with greater general forecasting experience may also affect the extent to which their forecast revisions are conditioned by managers’ forecasting track record, but these findings are less consistent across modelling choices.

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Associate Professor Mark Wilson

Mark Wilson is the Deputy Director (Research) in the Research School of Accounting at the ANU. His research interests include accounting, economic and business history, earnings quality, the response of markets and securities analysts to financial reporting information and transaction cost economics.

Mark is an Editor (Financial Accounting) of Accounting and Finance, and Associate Editor (Audit) of the Australian Journal of Management.He has published in leading journals, including Contemporary Accounting ResearchAuditing: A Journal of Practice and Theory, the Journal of Business Finance and AccountingAccounting and Business ResearchAccounting and Finance, the Journal of Business Ethics,  the Journal of Management Information Systems and Abacus. Mark's PhD thesis was awarded the SJ Butlin Prize for the best dissertation completed in Australia or New Zealand between 2006-08 in the area of Economic history. Mark is an active researcher and supervisor at the Doctoral and Hons. levels, and was a member of the AFAANZ 2013 and 2014 Technical Committee (Financial Accounting).

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