A Comparison of the Information Content of Insider Trading and Management Earnings Forecasts

1985 ◽  
Vol 20 (1) ◽  
pp. 1 ◽  
Author(s):  
Stephen H. Penman
Keyword(s):  
Information Content ◽  
Insider Trading ◽  
Earnings Forecasts ◽  
Management Earnings Forecasts

Credibility of Management Forecasts

2005 ◽  
Vol 80 (4) ◽  
pp. 1233-1260 ◽  
Author(s):  
Jonathan L. Rogers ◽  
Phillip C. Stocken
Keyword(s):  
Insider Trading ◽  
Financial Distress ◽  
Stock Price ◽  
Earnings Forecasts ◽  
Industry Concentration ◽  
Management Forecasts ◽  
Management Earnings Forecasts ◽  
Forecast Bias ◽  
Price Response ◽  
Trading Activities

We examine how the market's ability to assess the truthfulness of management earnings forecasts affects how managers bias their forecasts, and we evaluate whether the market's response to management forecasts is consistent with it identifying predictable forecast bias. We find managers' willingness to misrepresent their forwardlooking information as a function of their incentives varies with the market's ability to detect misrepresentation. We examine incentives induced by the litigation environment, insider trading activities, firm financial distress, and industry concentration. With regard to the stock price response to forecasts, we find the market varies its response with the predictable bias in the forecast. The efficiency of the market's response, however, varies with the forecast news.

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