The impact of conservatism on management earnings forecasts

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• 作者：Kai Wai Hui ; Steve Matsunaga ; Dale Morse
• 关键词：Management forecasts ; Conservatism ; Credibility
• 刊名：Journal of Accounting and Economics
• 出版年：2009
• 出版时间：June 2009
• 年：2009
• 卷：47
• 期：3
• 页码：192-207
• 全文大小：192 K

文摘

We investigate the empirical relation between a firm's accounting conservatism and management's issuance of quantitative earnings forecasts. Using three measures of conservatism from prior literature, along with two aggregate measures, we find a negative association between conservatism and the frequency, specificity, and timeliness of management forecasts. The results are robust to estimating the regression in changes, using firm fixed-effects, and using a two-stage instrumental variables approach. Overall, these results suggest that accounting conservatism acts as a substitute for management forecasts by decreasing information asymmetry in the market and reducing potential litigation through the timely reporting of bad news.