Do management earnings forecasts fully reflect information in past earnings changes?

Purpose It has been widely documented that investors and analysts underreact to information in past earnings changes, a fundamental performance indicator. The purpose of this paper is to examine whether managers’ voluntary disclosure efficiently incorporates information in past earnings changes, whether analysts recognize and fully anticipate the potential inefficiency in management forecasts and whether managers’ potential forecasting inefficiency entirely results from intentional disclosure strategies or at least partly reflects managers’ unintentional information processing biases. Design/methodology/approach Archival data were used to empirically test the relation between management earnings forecast errors and past earnings changes. Findings Results show that managers underreact to past earnings changes when projecting future earnings and analysts recognize, but fail to fully anticipate, the predictable bias associated with past earnings changes in management forecasts. Moreover, analysts appear to underreact more to past earnings changes when management forecasts exhibit greater underestimation of earnings change persistence. Further analyses suggest that the underestimation of earnings change persistence is at least partly attributable to managers’ unintentional information processing bias. Originality/value This study contributes to the voluntary disclosure literature by demonstrating the limitation in the informational value of management forecasts. The findings indicate that the effectiveness of voluntary disclosure in mitigating market mispricing is inherently limited by the inefficiency in management forecasts. This study can help market participants to better use management forecasts to form more accurate earnings expectations. Moreover, our evidence suggests a managerial information processing bias with respect to past earnings changes, which may affect managers' operational, investment or financing decisions.

The Role of Retrospective Negative Information-Processing Biases in Remitted Depression

Major Depressive Disorder (MDD) is characterized by persistent and impairing low mood and loss of interest or pleasure. Given that MDD is highly recurrent, it is important to identify which impairments remain during remission and may predict recurrence. A key impairment in MDD is that they tend to process current and past information more negatively than healthy individuals. However, it is unclear whether this negative information-processing bias persists during remission. This study will investigate a retrospective type of negative information-processing bias when recollecting recent real-world events among young adults with remitted depression (n=31) compared to healthy individuals (n=32). Participants were given a handheld device and responded to prompts on the device four times a day for one week. The prompts asked whether the individual experienced a positive or negative event since the last prompt and how intense that negative or positive event was. At the end of the week, participants completed a questionnaire regarding their experiences over the past week. They were asked how many negative and positive events the individual experienced over the past week, and the overall intensity of these negative and positive events. It is hypothesized that individuals with remitted depression will report a greater number and intensity of negative events in the distal retrospection period than in the proximal retrospection period, but no difference is expected for positive events. The opposite findings are expected for healthy individuals. This research may advance the understanding of persistent impairments in remitted depression while focusing on real-life events.

The Complex Relation Between Receptivity to Pseudo-Profound Bullshit and Political Ideology

This research systematically mapped the relationship between political ideology and receptivity to pseudo-profound bullshit—that is, obscure sentences constructed to impress others rather than convey truth. Among Swedish adults ( N = 985), bullshit receptivity was (a) robustly positively associated with socially conservative (vs. liberal) self-placement, resistance to change, and particularly binding moral intuitions (loyalty, authority, purity); (b) associated with centrism on preference for equality and even leftism (when controlling for other aspects of ideology) on economic ideology self-placement; and (c) lowest among right-of-center social liberal voters and highest among left-wing green voters. Most of the results held up when we controlled for the perceived profundity of genuine aphorisms, cognitive reflection, numeracy, information processing bias, gender, age, education, religiosity, and spirituality. The results are supportive of theoretical accounts that posit ideological asymmetries in cognitive orientation, while also pointing to the existence of bullshit receptivity among both right- and left-wingers.