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Research Details

Management Forecasts: Biases, Incentives, and Spillover Effects, RAND Journal of Economics

Abstract

Management earnings forecasts (MEF), a form of voluntary disclosure, are di¤erent from most other disclosures because MEF have spillover e¤ects on managers?subsequent operating decisions and earnings reports. These e¤ects arise from managers?attempts to reduce their forecast errors. Even though managers can separate their ?rms from less pro?table ?rms by issuing forecasts the latter cannot match, there is no equilibrium where all managers issue forecasts. We show that managers who issue (resp., don?t issue) MEF choose above (resp., below) ?rst-best operating actions. We identify which managers issue MEF and why allowing managers to misreport earnings may increase expected earnings.

Type

Article

Author(s)

Ronald A. Dye, Sri Sridharan

Date Published

2024

Citations

Dye, Ronald A., and Sri Sridharan. 2024. Management Forecasts: Biases, Incentives, and Spillover Effects. RAND Journal of Economics.

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