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Corporate Social Responsibility Awareness and Management Forecast Bias

In: Corporate Social Responsibility and Corporate Finance in Japan

Author

Listed:
  • Megumi Suto

    (Waseda University)

  • Hitoshi Takehara

    (Waseda University)

Abstract

For investors, how to gain accurate and unbiased information about future earnings of an investee company is critical to demand a risk premium that is reflected in the expected rate of return. Management earnings forecastsManagement earnings forecasts are a major source of information about future earnings and are posited as especially important in the Japanese disclosure system. However, managers might face incentive bias toward opportunistic decisions on the forecast from a short-term view, as there is a conflict of interest between managers and investors about risk premium. The issue of how to mitigate such incentive bias is a key for disciplined pricing in the market by reducing information asymmetry. Management earnings forecasts definitely influence both the quality and quantity of information about future earnings. Responsible management forecasts are the core of the self-disciplining mechanism to provide more accurate and less biased information in the market.

Suggested Citation

  • Megumi Suto & Hitoshi Takehara, 2018. "Corporate Social Responsibility Awareness and Management Forecast Bias," Advances in Japanese Business and Economics, in: Corporate Social Responsibility and Corporate Finance in Japan, chapter 0, pages 155-177, Springer.
    • Handle: RePEc:spr:advchp:978-981-10-8986-2_7
    DOI: 10.1007/978-981-10-8986-2_7
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    Cited by:

    1. AMBASHI Masahito, 2023. "How are Organizational Architectures of Corporate Social Responsibility Related to Corporate Performance? The case of Japanese listed companies," Discussion papers 23030, Research Institute of Economy, Trade and Industry (RIETI).

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