Does the Stock Market Know the Systematic Bias in Management Earnings Forecasts?: Empirical Evidence from Japan

2002 ◽  
Author(s):  
Koji Ota
Keyword(s):  
Stock Market ◽  
Empirical Evidence ◽  
Earnings Forecasts ◽  
Systematic Bias ◽  
Management Earnings Forecasts

An Empirical Test of the Signaling Effect of Management's Earnings Forecasts: A Decomposition of the Earnings Surprise and Forecast Surprise Effects

1995 ◽  
Vol 10 (4) ◽  
pp. 787-802 ◽  
Author(s):  
Gillian Hian Heng Yeo ◽  
David A. Ziebart
Keyword(s):  
Stock Market ◽  
Market Reaction ◽  
Empirical Test ◽  
Earnings Forecasts ◽  
The Other ◽  
Earnings Forecast ◽  
Corporate Management ◽  
Management Earnings Forecasts ◽  
Market Reactions ◽  
Earnings Surprise

When corporate management issues an earnings forecast there are potentially two surprises. One potential surprise is that a forecast was issued and the other is the surprise in the earnings forecast. Accordingly, the observed stock market reaction to management earnings forecasts may be due to one or the other, or both. This study decomposes the cross-sectional variability in stock market reactions to management earnings forecasts into the portions attributable to the forecast surprise and the earnings surprise. The results indicate that the market's reaction is a function of both the earnings surprise and the forecast surprise. However, the market reaction is more associated with forecast surprise than with the earnings surprise. This suggests that results in previous studies on the market reactions to management earnings forecasts may need to be reconsidered.

scholarly journals Option Compensation and Optimism Bias in Management Earnings Forecasts

2019 ◽  
Vol 1 (2) ◽  
pp. 1-23
Author(s):  
Yu-Ho Chi ◽  
David A Ziebart ◽  
Terry Campbell
Keyword(s):  
Empirical Evidence ◽  
Stock Price ◽  
Earnings Forecasts ◽  
Stock Option ◽  
Share Price ◽  
Optimistic Bias ◽  
Management Earnings Forecasts ◽  
Optimism Bias ◽  
Corporate Managers ◽  
Option Compensation

We examine the relation between the option compensation received by corporate managers and the extent of optimistic bias in their earnings forecasts. Specifically, we are interested in the extent to managers with a high amount of option compensation tend to have a self-serving optimism. We examine whether there is evidence consistent with the argument that managers have a self-serving interest to issue optimistic forecasts since their compensation is a function of stock price and higher earnings usually result in a higher share price. We hypothesize that management’ optimism (optimistic bias in their earnings forecasts) increases as their stock option compensation increases. Our empirical evidence indicates that highly compensated managers are associated with the likelihood of issuing upwardly biased (i.e. more optimistic) earnings forecasts.

scholarly journals The Effect Of IFRS Adoption On Likelihood Of Management Earnings Forecasts: Evidence In Korea

2016 ◽  
Vol 32 (6) ◽  
pp. 1697 ◽  
Author(s):  
Chang Seop Rhee ◽  
Yong Keun Yoo ◽  
Seung Min Cha
Keyword(s):  
Empirical Evidence ◽  
Financial Reporting ◽  
Spillover Effect ◽  
Earnings Forecasts ◽  
Reporting Standards ◽  
Management Earnings Forecasts ◽  
Empirical Results ◽  
Financial Reporting Standards ◽  
Ifrs Adoption ◽  
Reporting Structure

Korean listed companies adopted International financial reporting standards (IFRS) in 2011 mandatorily. The IFRS adoption modifies corporate financial reporting structure and further it can affect managers’ incentive for disclosing their earnings forecasts. We investigate the association between IFRS adoption and likelihood of management earnings forecasts. From the empirical results, we find that mandatory IFRS adopted companies are less likely to issue their earnings forecasts after IFRS adoption. It implies that investors’ belief about management earnings forecasts as useful information is weakened after IFRS adoption compare to pre-IFRS adoption period. Therefore, managers’ incentive for providing earnings forecasts decreases. This study will contribute to academics and disclosure-related practitioners by reporting how IFRS adoption makes an influence to managers’ incentive of management earnings forecasts issuance. We also believe that the empirical evidence may shed some lights on the understanding of the spillover effect of IFRS adoption to management earnings forecasts. 

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