Kala, Tejshree
Description
Prior research provides evidence on how manager
attributes affect characteristics of management earnings
forecasts and how firm characteristics affect market
participants’ perception of the credibility of management
earnings forecasts. Using a manager-firm matched panel dataset,
this thesis examines whether the perceived credibility of
management earnings forecasts, as measured by investors’ and
analysts’ responses to management earnings forecasts news, are
...[Show more] influenced by: (1) the forecasting track records of individual
managers, and (2) manager attributes. The results indicate that,
overall, investors’ responses to management earnings forecasts
vary with the firms’ forecasting track records but not with the
forecasting track records of individual managers or with manager
attributes. The results indicate that analysts’ responses to
management earnings forecasts are positively associated with
managers’ individual forecasting track records. Results also
indicate that analysts react less strongly to management earnings
forecasts issued by CEOs with CFO experience, and react more
strongly to management earnings forecasts issued by managers who
are also the chairperson. Overall, the results suggest that
analysts, being more sophisticated users, consider both manager-
and firm-specific characteristics in their assessments of
management earnings forecasts. This thesis contributes to the
literature by providing a more comprehensive understanding of
whether manager-specific forecasting track records and manager
attributes matter to investors and analysts. The findings
reported in this thesis may help to inform the communicators
(firms and managers) of management earnings forecasts about what
matters to users, which may help them vary their forecasting
behaviours. Results may also help inform boards of directors
about what matters to users of management earnings forecasts and
help the board better monitor managers in this regard, and,
inform observers such as regulators and commentators in providing
signals about what matters to users in terms managers’
forecasting behaviours and attributes.
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