Does the equity market reward “superior” management earnings forecast? Evidence from the U.S. quarterly earnings guidance / Tina Wang

Wang, Tina (2021) Does the equity market reward “superior” management earnings forecast? Evidence from the U.S. quarterly earnings guidance / Tina Wang. Asia-Pacific Management Accounting Journal (APMAJ), 16 (3): 30. pp. 1-30. ISSN 2550-1631


This paper examines whether equity markets reward the controversial practice of issuing short-term management earnings forecasts. Using a large sample of quarterly earnings forecasts, this research found that firms may temporarily reduce stock price volatility by issuing quarterly earnings forecasts. Furthermore, the analysis showed that not all guidance issuers are equally rewarded by equity capital markets. The benefits of reduced stock price volatility and favorable market valuation primarily accrue to firms with a track record of supplying accurate and timely short-term earnings forecasts. Findings suggest that superior short-term earnings guidance, which fosters transparent financial information environments and reduces investor information uncertainty, is indeed rewarded by equity capital markets. As limited research examines the association between forecast attributes and the capital market consequences of quarterly earnings guidance, this study aimed to provide empirical evidence on equity capital market rewards by issuing high-quality quarterly earnings guidance. A practical implication is that firms need to invest in accounting information systems and accounting talent in order to achieve capital market benefits of supplying high-quality short-term earnings forecasts.


Item Type: Article
Email / ID Num.
Wang, Tina
Subjects: H Social Sciences > HG Finance > Investment, capital formation, speculation
Divisions: Universiti Teknologi MARA, Shah Alam > Accounting Research Institute (ARI)
Journal or Publication Title: Asia-Pacific Management Accounting Journal (APMAJ)
UiTM Journal Collections: UiTM Journal > Asia-Pacific Management Accounting Journal (APMAJ)
ISSN: 2550-1631
Volume: 16
Number: 3
Page Range: pp. 1-30
Keywords: quarterly earnings guidance, forecast attributes, accounting information system
Date: December 2021
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