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Managerial Learning from Analyst Feedback to Voluntary Capex Guidance, Investment Efficiency, and Firm Performance

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  • Jihun Bae

    (Department of Business Economics, Erasmus School of Economics, Erasmus University Rotterdam, Burgemeester Oudlaan 50, 3062 PA Rotterdam, Netherlands)

  • Gary C. Biddle

    (Department of Accounting, Faculty of Business and Economics, University of Melbourne, Carlton, Victoria 3010, Australia)

  • Chul W. Park

    (Independent, Seoul 03631, Korea)

Abstract

We test predictions that managers issuing voluntary capex guidance learn from analyst feedback and that this learning enhances investment efficiency and firm performance. Our findings are consistent with these predictions. First, we find that managers’ capex adjustments and capex guidance revisions relate positively with analyst feedback measured by differences between postguidance analyst capex forecasts and managerial capex guidance. Second, changes in investment efficiency relate positively with analyst feedback. Third, subsequent firm financial performance relates positively with the predicted values of both managers’ capex adjustments and capex guidance revisions. These findings extend prior evidence regarding sources of managerial learning and investment efficiency and help to explain the active issuance of voluntary guidance by managers in settings where, as for capex guidance, the potential for managerial learning from related share price effects is limited, as we also explain.

Suggested Citation

  • Jihun Bae & Gary C. Biddle & Chul W. Park, 2022. "Managerial Learning from Analyst Feedback to Voluntary Capex Guidance, Investment Efficiency, and Firm Performance," Management Science, INFORMS, vol. 68(1), pages 583-607, January.
    • Handle: RePEc:inm:ormnsc:v:68:y:2022:i:1:p:583-607
    DOI: 10.1287/mnsc.2020.3896
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