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Management Forecasts, Idiosyncratic Risk, and the Information Environment

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  • Kitagawa, Norio
  • Okuda, Shin’ya

Abstract

Management forecasts are an important source of information for the Japanese stock market. In this paper, we use management forecast error as a proxy for disclosure quality to investigate the relationship between disclosure quality and idiosyncratic risk. We find that management forecast error is positively related to idiosyncratic risk, suggesting that high-quality public information reduces idiosyncratic risk. Furthermore, we present evidence that management forecast error is less positively related to idiosyncratic risk in relatively good information environments.

Suggested Citation

  • Kitagawa, Norio & Okuda, Shin’ya, 2016. "Management Forecasts, Idiosyncratic Risk, and the Information Environment," The International Journal of Accounting, Elsevier, vol. 51(4), pages 487-503.
    • Handle: RePEc:eee:accoun:v:51:y:2016:i:4:p:487-503
    DOI: 10.1016/j.intacc.2016.10.002
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    Cited by:

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    3. Asongu, Simplice A. & Koomson, Isaac & Tchamyou, Vanessa S., 2017. "Financial globalisation uncertainty/instability is good for financial development," Research in International Business and Finance, Elsevier, vol. 41(C), pages 280-291.
    4. Kitagawa, Norio, 2021. "Macroeconomic uncertainty and management forecast accuracy," Journal of Contemporary Accounting and Economics, Elsevier, vol. 17(3).

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    More about this item

    Keywords

    Management forecasts; Idiosyncratic risk; Information environment; Disclosure quality; Japanese stock market;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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