Public Forecasts, Internal Projections, and Corporate Financial Policy

78 Pages Posted: 1 Jun 2020 Last revised: 30 Aug 2022

See all articles by Ben Charoenwong

Ben Charoenwong

National University of Singapore - Department of Finance; Chicago Global

Yosuke Kimura

Tokyo Institute of Technology - School of Engineering

Alan Kwan

The University of Hong Kong

Date Written: March 4, 2020

Abstract

How important are strategic public forecasting incentives relative to internal projections? We compare confidentially surveyed internal financial projections with public forecasts using data from Japan, where both are mandatory. Public forecasts tend to be systematically pessimistic relative to internal projections and vary when managers face more shareholder pressure and financial constraints. Although public forecasts do not affect realized investments after controlling for internal projections, the public-internal forecast gap predicts higher stock returns, earnings surprises, fewer seasoned equity offerings, stock repurchases, and higher managerial compensation. Finally, we discuss the implications of our findings for the literature on disclosure and managerial expectations.

Keywords: Managerial Guidance, Strategic Disclosure, Market Efficiency, Corporate Governance

JEL Classification: D83, E22, G14, G31, G34, G41

Suggested Citation

Charoenwong, Ben and Kimura, Yosuke and Kwan, Alan, Public Forecasts, Internal Projections, and Corporate Financial Policy (March 4, 2020). Available at SSRN: https://ssrn.com/abstract=3592103 or http://dx.doi.org/10.2139/ssrn.3592103

Ben Charoenwong (Contact Author)

National University of Singapore - Department of Finance ( email )

Mochtar Riady Building
15 Kent Ridge Drive
Singapore, 119245
Singapore

HOME PAGE: http://bizfaculty.nus.edu/faculty-profiles/519-ben

Chicago Global ( email )

67 AYER RAJAH CRESCENT, #02-10/17, Singapore
Singapore, 139950
Singapore

HOME PAGE: http://chicago.global

Yosuke Kimura

Tokyo Institute of Technology - School of Engineering ( email )

Tokyo
Japan

Alan Kwan

The University of Hong Kong ( email )

Pokfulam Road
Hong Kong, Pokfulam HK
China

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