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Forward-Looking MD&A Disclosures and the Information Environment

Author

Listed:
  • Volkan Muslu

    (Bauer College of Business, University of Houston, Houston, Texas 77004)

  • Suresh Radhakrishnan

    (Jindal School of Management, University of Texas at Dallas, Richardson, Texas 75080)

  • K. R. Subramanyam

    (Marshall School of Business, University of Southern California, Los Angeles, California 90089; and Indian School of Business, Hyderabad 5000032, India)

  • Dongkuk Lim

    (College of Business, Idaho State University, Pocatello, Idaho 83201)

Abstract

We use computer-intensive techniques to study the informational properties of forward-looking disclosures in the management discussion and analysis (MD&A) sections of 10-K filings made with the Securities and Exchange Commission. We find that firms make more forward-looking MD&A disclosures when their stock prices have lower informational efficiency, i.e., when their stock prices poorly reflect future earnings information. The greater levels of forward-looking MD&A disclosures help improve yet are unable to completely mitigate the lower informational efficiency of stock prices for such firms. These findings are stronger for operations-related forward-looking disclosures, disclosures that are made prior to 2000, and disclosures made by loss firms.Data, as supplemental material, are available at http://dx.doi.org/10.1287/mnsc.2014.1921 . This paper was accepted by Mary Barth, accounting .

Suggested Citation

  • Volkan Muslu & Suresh Radhakrishnan & K. R. Subramanyam & Dongkuk Lim, 2015. "Forward-Looking MD&A Disclosures and the Information Environment," Management Science, INFORMS, vol. 61(5), pages 931-948, May.
    • Handle: RePEc:inm:ormnsc:v:61:y:2015:i:5:p:931-948
    DOI: 10.1287/mnsc.2014.1921
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