What Do Management Earnings Forecasts Convey About the Macroeconomy?

We decompose quantitative management earnings forecasts into macroeconomic and firm-specific components to determine the extent to which voluntary disclosure provided by management has macroeconomic information content. We provide evidence that the forecasts of bellwether firms, which are defined as...

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Bibliographic Details
Published in:Journal of accounting research 2013-05, Vol.51 (2), p.225-266
Main Authors: BONSALL IV, SAMUEL B., BOZANIC, ZAHN, FISCHER, PAUL E..
Format: Article
Language:English
Subjects:
Corporate management
Disclosure
Earnings announcements
Earnings forecasting
Macroeconomics
Management
Studies
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Summary:We decompose quantitative management earnings forecasts into macroeconomic and firm-specific components to determine the extent to which voluntary disclosure provided by management has macroeconomic information content. We provide evidence that the forecasts of bellwether firms, which are defined as firms in which macroeconomic news explains the greatest amount of variation in the forecasts, provide timely information to the market about the macroeconomy when bundled with earnings announcements. Further, we show that bellwether firms provide timely information about both industry-specific events and broader economic events. Finally, we document that the macroeconomic news in individual forecasts is more pronounced for bad news and point forecasts.
ISSN:0021-8456
1475-679X
DOI:10.1111/1475-679X.12007