Positive and Negative Information Transfers from Management Forecasts

Posted: 4 Apr 2008

See all articles by Yongtae Kim

Yongtae Kim

Santa Clara University - Leavey School of Business

Michael Lacina

University of Houston-Clear Lake - School of Business

Myung Seok Park

Virginia Commonwealth University (VCU) - School of Business

Abstract

We examine positive and negative information transfers associated with management earnings and revenue forecasts. Positive information transfers are due to industry commonalities whereas negative information transfers are caused by competitive shifts. We argue that positive and negative intra-industry information transfers offset each other and lead to an overall finding of no information transfers even though they exist. We also conjecture that the type of information transfers from the same management forecast can be positive or negative based on the characteristics of the information receiver. We hypothesize positive information transfers to non-rival firms and negative information transfers to rivals. Consistent with our prediction, we find negative (positive) information transfers between forecasting firms and non-forecasting rival (non-rival) firms in the same industry. Through analyses using competitors identified by Hoover's and 10-K reports, we show more general evidence of negative information transfers to rival firms.

Keywords: Information transfer, management earnings forecast, management revenue forecast, rival

JEL Classification: M41, M45, G14, L10

Suggested Citation

Kim, Yongtae and Lacina, Michael and Park, Myung Seok, Positive and Negative Information Transfers from Management Forecasts. Journal of Accounting Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1115980

Yongtae Kim (Contact Author)

Santa Clara University - Leavey School of Business ( email )

500 El Camino Real
Santa Clara, CA California 95053
United States
(408) 554-4667 (Phone)
(408) 554-2331 (Fax)

Michael Lacina

University of Houston-Clear Lake - School of Business ( email )

Houston, TX 77058
United States

Myung Seok Park

Virginia Commonwealth University (VCU) - School of Business ( email )

301 W. Main St.
School of Business
Richmond, VA 23284-4000
United States
(804)828-3161 (Phone)

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