Voluntary Disclosure and Analyst Forecast
Year: 2016
Type: article
Abstract: Empiricists document that firms more often voluntarily disclose bad news than good news and link this pessimism to managers’ increased incentives not to fall short of earnings expectations. This paper analyzes the voluntary disclosure of a manager’s private information by explicitly considering her incentives to meet or beat an analyst’s earnings forecast. The model predicts that managers who face strong incentives to meet or beat these forecasts more frequently disclose bad news than good news in order to guide analysts’ expectations about future earnings downward. This pessimism is higher in markets with less informed managers and may hold even if the manager has strong incentives for high stock prices and meet-or-beat incentives are comparably low.
Source: European Accounting Review
Author: Konrad Lang
Institution: University of Tübingen
Language: English
Subfield: Accounting
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2182017860