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Management Earnings Forecasts and Value of Analyst Forecast Revisions

Author

Listed:
  • Yongtae Kim

    (Leavey School of Business, Santa Clara University, Santa Clara, California 95053)

  • Minsup Song

    (Sogang Business School, Sogang University, Seoul 121-742, Republic of Korea)

Abstract

This study examines the stock-price reactions to analyst forecast revisions around earnings announcements to test whether preannouncement forecasts reflect analysts' private information or piggybacking on confounding events and news. We find that management earnings forecasts influence the timing and precision of analyst forecasts. More importantly, evidence suggests that prior studies' finding of weaker (stronger) stock-price responses to forecast revisions in the period immediately after (before) the prior-quarter earnings announcement disappears once management earnings forecasts are controlled for. To the extent that management earnings forecasts are public disclosures, our results suggest that the importance of analysts' information discovery role documented in prior studies is likely to be overstated. This paper was accepted by Wei Jiang, finance .

Suggested Citation

  • Yongtae Kim & Minsup Song, 2015. "Management Earnings Forecasts and Value of Analyst Forecast Revisions," Management Science, INFORMS, vol. 61(7), pages 1663-1683, July.
    • Handle: RePEc:inm:ormnsc:v:61:y:2015:i:7:p:1663-1683
    DOI: 10.1287/mnsc.2014.1920
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    References listed on IDEAS

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    9. Li, Donghui & Chen, Zhian & An, Zhe & Murong, Michael, 2017. "Do financial analysts play a role in shaping the rival response of target firms? International evidence," Journal of Corporate Finance, Elsevier, vol. 45(C), pages 84-103.

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