Business Cycle and Management Earnings Forecasts

Posted: 2 Nov 2013

See all articles by Haiyan Jiang

Haiyan Jiang

Macquarie University - Department of Accounting and Corporate Governance; University of Waikato - Management School

Ahsan Habib

Auckland University of Technology

Rong Gong

Independent

Date Written: October 31, 2013

Abstract

This study examines the effects of the economic cycle on the properties of management earnings forecasts. Using management forecast data from First Call and the NBER business cycle measure, we document that economic recession is positively associated with forecast frequency and forecast error while is negatively related to forecast precision. We also analyse the effect of managerial incentives during recession, and find that litigation risk negatively affects forecast frequency and forecast error, but the effect of another incentive, capital market transactions, is not consistent across specifications. Our findings provide a broader perspective for assessing the determinants of management earnings forecasts.

Keywords: Management earnings forecasts, business cycle, litigation risk

JEL Classification: M41

Suggested Citation

Jiang, Haiyan and Habib, Ahsan and Gong, Rong, Business Cycle and Management Earnings Forecasts (October 31, 2013). Available at SSRN: https://ssrn.com/abstract=2348345

Haiyan Jiang

Macquarie University - Department of Accounting and Corporate Governance ( email )

Sydney, NSW 2109
Australia

University of Waikato - Management School ( email )

Hamilton
New Zealand

Ahsan Habib (Contact Author)

Auckland University of Technology ( email )

AUT City Campus
Private Bag 92006
Auckland, Auckland 1142
New Zealand

Rong Gong

Independent ( email )

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