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Benchmark for Earnings Performance: Management Forecasts versus Analysts’ Forecasts

Author

Listed:
  • Sandip Dhole

    (ISB, Hyderabad)

  • Sagarika Mishra

    (Deakin University)

  • K. Sivaramakrishnan

Abstract

We investigate the incremental information conveyed by management forecast errors over and above the consensus analyst forecast error at the time of earnings announcement. To the extent that analysts rationally revise their forecasts to subsume information contained in management releases, it is reasonable to argue that management forecasts are “dated” and that the revised analysts’ forecasts would constitute the more timely benchmark to evaluate performance. We find that when management forecasts and the subsequent analyst forecasts are different, management forecast errors convey information to the stock market that is not reflected in the consensus analyst forecast errors.

Suggested Citation

  • Sandip Dhole & Sagarika Mishra & K. Sivaramakrishnan, "undated". "Benchmark for Earnings Performance: Management Forecasts versus Analysts’ Forecasts," Working Papers 2012_06, Deakin University, Department of Economics.
    • Handle: RePEc:dkn:ecomet:fe_2012_06
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    File URL: http://www.deakin.edu.au/buslaw/aef/workingpapers/fin-econometrics/2012_06.pdf
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    More about this item

    Keywords

    Management forecasts; Analysts’ forecasts; Earnings Response Coefficient;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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