|
Once Bitten, Twice Shy: The Relation Between Outcomes of Earnings Guidance and the Provision of Subsequent Guidance
Mei Feng, University of Pittsburgh
Adam Koch, Carnegie Mellon University
ABSTRACT. We examine how the propensity to issue quarterly earnings guidance is affected by outcomes from previously issued earnings guidance. We hypothesize that managers are less likely to provide guidance for a given year when past management forecasts have been overly optimistic, when past forecasts have resulted in earnings disappointments, and when past forecasts were accompanied by high levels of stock price volatility. Our empirical work confirms these hypotheses. In addition, we find that even firms continuing to guide give less precise guidance and guide for fewer quarters within a year when they have previously experienced adverse outcomes from issuing guidance. Finally, we document that outcomes from previously issued guidance also help explain the recent discontinuation of earnings guidance by many high-profile U.S. firms.
Full-Text is no longer available online. Please contact the author(s) for more information about this manuscript.
Back to Session Listing
|