Management earnings forecasts and the quality of analysts’ forecasts: The moderating effect of audit committees

This paper examines how rank-order tournament incentives in the top management team (TMT) influence the quality of management earnings forecasts (MEFs). Instead of breeding feelings of inequality and fostering peer sabotage, the large pay gap between the CEO and subordinates may motivate top executives to issue more accurate and precise forecasts to win the prize of promotion. The positive tournament effect on the quality of MEFs is weakened (strengthened) when the perceived probability of promotion for candidates is low (high). We find that firms with higher tournament incentives are more likely to issue supplementary forecasts to increase the credibility of MEFs. By examining the tournament effect at each subordinate manager level, we find that CFOs are the driving force in controlling the frequency and quality of management forecasts and chief marketing officers (CMOs) may also contribute to the quality of management forecasts. The results are robust to multiple measures of tournament incentives and multiple research designs.

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The role of the gender diversity of audit committees in modelling the quality of management earnings forecasts of initial public offers in Malaysia

Gender in Management An International Journal ◽

10.1108/gm-09-2016-0157 ◽

2017 ◽

Vol 32 (6) ◽

pp. 420-440 ◽

Cited By ~ 7

Author(s):

Mohammed Abdullah Ammer ◽

Nurwati A. Ahmad-Zaluki

Keyword(s):

Board Of Directors ◽

Forecast Error ◽

Gender Diversity ◽

Earnings Forecasts ◽

Audit Committees ◽

Management Earnings Forecasts ◽

Content Type ◽

Female Directors ◽

The Board Of Directors

Purpose Presently, one of the major governance issues faced by management and shareholders of organizations is the gender composition of the boards of directors and audit committees. This study aims to examine the impact of gender diversity in audit committees on the accuracy of management earnings forecasts disclosure in initial public offering (IPO) prospectuses. Design/methodology/approach The study sample comprises 190 Malaysian companies issuing IPOs that transformed into public companies during the period 2002-2012. Earnings forecasts accuracy (quality) is proxied by absolute forecast error and the study model is developed based on the frameworks of the signalling theory, the agency theory and the resource-dependence theory. Findings The study proposes that female directors introduce a set of specific features in the boardroom that serve to improve investor protection and efficient monitoring of management. However, findings reveal an insignificantly positive relationship between gender diversity in audit committees and absolute forecast error, which shows that more female directors in audit committees could translate into more errors and less accuracy in earnings forecasts. Practical implications Considering the recent regulatory developments that encourage the number of women on the board of directors, the findings obtained have significant implications for policymakers. The study findings can also be invaluable to investors, investment analysts, market players and researchers. Originality/value The composition of the board of directors and audit committees in terms of gender plays a significant role in the promotion of effective corporate governance practices. This study is one of the pioneering studies that examines the advantages of gender diversity in the board of directors. It is also the first study to extend IPO literature by investigating the role of gender diversity in audit committees in the enhancement of accurate management earnings forecasts included in the IPO prospectuses.

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The effect of disclosure regulation on the bias and accuracy of management earnings forecasts in Malaysian IPO prospectuses

Journal of Financial Reporting and Accounting ◽

10.1108/jfra-11-2015-0099 ◽

2017 ◽

Vol 15 (1) ◽

pp. 59-77 ◽

Cited By ~ 4

Author(s):

Mohammed Abdullah Ammer ◽

Nurwati A. Ahmad-Zaluki

Keyword(s):

Initial Public Offering ◽

Voluntary Disclosure ◽

Earnings Forecasts ◽

Management Earnings Forecasts ◽

Multivariate Statistical ◽

Disclosure Regulation ◽

Content Type ◽

Study Results ◽

The Impact

Purpose This paper aims to examine the impact of disclosure regulation on the levels of bias and accuracy in management earnings forecasts disclosed in the prospectuses of Malaysian initial public offering (IPO). Specifically, the authors investigated the two environments of regulation (mandatory versus voluntary) to draw some conclusions regarding the benefits of regulating disclosure of management earnings forecasts. Design/methodology/approach A sample of 111 Malaysian IPOs listing on the Main Market of Bursa Malaysia from January 1, 2004 to February 29, 2012 was used. The paper uses both univariate and multivariate statistical analyses on this sample of IPOs. Findings The empirical results of these multivariate regressions indicated that disclosure regulation has positive and significant impact on the bias and accuracy of management earnings forecasts disclosed in IPO prospectus. In general, the study results suggest that using disclosure regulation to improve the quality of IPO earnings forecasts can be, to some extent, an effective strategy. Practical implications The findings of this study have important implications for regulators and investors. The findings can provide them some relevant insights on the improvements to the earnings forecasts accuracy and trends of the forecast (optimistic or pessimistic) after the change from mandatory to voluntary disclosure. Thus, the authorities may learn whether this change is an effective policy or whether the regime of mandatory disclosure was better for IPO companies and should be reversed. Originality/value This study is regarded as the first attempt to investigate the impact of reforms in disclosure regulation on the quality of management earnings forecasts of IPO prospectuses in a developing nation such as Malaysia. In spite of this, the paper focuses on a single country, and it contributes significant insights to the debate about the credibility of IPO management earnings forecasts.

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Disaggregation and the Quality of Management Earnings Forecasts

SSRN Electronic Journal ◽

10.2139/ssrn.1270844 ◽

2008 ◽

Cited By ~ 8

Author(s):

Clara Xiaoling Chen ◽

Rajib Doogar ◽

Laura Yue Li ◽

Theodore Sougiannis

Keyword(s):

Earnings Forecasts ◽

Management Earnings Forecasts

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Major government customer and management earnings forecasts

Frontiers of Business Research in China ◽

10.1186/s11782-020-00088-0 ◽

2020 ◽

Vol 14 (1) ◽

Author(s):

Agnes C. S. Cheng ◽

Wenli Huang ◽

Shaojun Zhang

Keyword(s):

Positive Impact ◽

Earnings Forecasts ◽

Price Impact ◽

Management Earnings Forecasts ◽

Publicly Traded ◽

Public Companies ◽

Publicly Traded Companies ◽

Customer Base ◽

The Us

Abstract This paper examines whether customer base composition in the US, that is, whether a firm’s major customers are government entities or publicly traded companies, affects the properties of its management earnings forecasts (MEFs). Using a sample of 1168 MEFs from 1998 to 2014, we find that firms whose major customers are government entities (i.e., government suppliers) issue more precise and more accurate MEFs than firms whose major customers are public companies (i.e., corporate suppliers). Moreover, when managers disclose negative information to the market, earnings forecasts issued by government suppliers have greater price impact than those issued by corporate suppliers. Collectively, our empirical results suggest that having major government customers has a positive impact on the quality of MEFs.

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