The use of management forecasts to dampen analysts' expectations by Chinese listed firms

Research output: Journal PublicationArticlepeer-review

10 Citations (Scopus)

Abstract

This paper studies the use of management earnings forecasts (MEF) to dampen analysts' expectations, i.e. expectation management, by Chinese listed companies. We reveal several important findings: Firstly, information asymmetry is positively associated with the use of MEF to dampen analysts' expectations. State control has been found to moderate this relationship. Secondly, dampening analysts' expectations using MEF leads to negative stock return reactions and downward analysts' forecast revisions. Thirdly, the effectiveness of "pre-empting bad news through MEF" appears mixed and dependent on the information content of MEF and measures of actual earnings surprises. Finally, firms that disclose MEF are found to engage in more earnings management to meet the forecasts than firms that do not.

Original languageEnglish
Pages (from-to)263-272
Number of pages10
JournalInternational Review of Financial Analysis
Volume45
DOIs
Publication statusPublished - 1 May 2016

Keywords

  • Analyst forecast
  • China
  • Earnings management
  • Management earnings forecast
  • Post-earnings announcement abnormal return

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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