The Effects of Management's Forecast Strategy on Venture Capitalist Investment Screening Judgment

Prior research indicates that management forecast strategies affect investors' perceptions of management, which, in turn, influence investors' judgments about the firm. The current study hypothesizes and demonstrates that decisions about the completeness and form of management's forecast disclosure affect venture capitalists' (VCs) investment screening judgments. In an experiment, 53 experienced VCs indicate whether they would recommend conducting due diligence on a new venture. I manipulate the completeness (inclusion vs. omission of quantitative data about the components of earnings) and form (point vs. range forecast values) of management's financial forecasts in a 2 X 2 between-subjects design. When management is more (less) complete in its forecast disclosure, participants make more (less) favorable investment screening judgments. Additionally, when managers provide less complete disclosures, the use of point rather than range forecasts leads to particularly unfavorable screening judgments, whereas when managers provide more complete disclosures, the use of point rather than range forecasts leads to particularly favorable screening judgments. Taken together, these results indicate that the completeness of forecast disclosure increases the favorability of screening judgments and decisions about the form of financial forecasts can offset some of the adverse consequences of less complete disclosure.

Name thesis:degree_name

Ph. D.

Level thesis:degree_level

doctoral

Discipline thesis:degree_discipline

Accounting and Information Systems

Department dc:contributor.department

Accounting and Information Systems

Grantor dc:publisher

Virginia Tech

Year dc:date.issued

2006

Author dc:creator

• Fleming, Damon M.

Chair dc:contributor.committeechair

• Cloyd, C. Bryan

Committee members dc:contributor.committeemember

• Yardley, James A.
• Jenkins, James G.
• Axsom, Danny K.
• Bhattacharjee, Sudip

• management forecasts
• venture capital
• investment screening
• management uncertainty
• management credibility
• strategic disclosure

Statement dc:rights

• In Copyright

Licence dc:rights.uri

• http://rightsstatements.org/vocab/InC/1.0/

Dc Identifier Other

etd-09222006-152718

OAI identifier oai:identifier

oai:vtechworks.lib.vt.edu:10919/29059