A Reexamination of Bias in Management Earnings Forecasts

This study finds that short-horizon MEF are pessimistically biased , while long-horizon MEF are optimistically biased. Previous claims that management earnings forecasts are unbiased could be driven by the cancellation effect that occurs between long-term optimistic bias and short-term pessimistic bias. The magnitude of bias is associated with three ex-ante factors---unexpected earnings, forecast horizon and firm size. Although the magnitude of the bias is predictable with these three factors, it seems that investors naively respond to bias component in the forecasts at MEF announcement. The bias in management earnings forecasts causes subsequent stock price reversal when subsequent earnings report are announced. In conclusion, initially, the market mechanistically responds to the biased MEF and subsequently corrects itself by reversing the previous overreaction.

Name thesis:degree_name

Ph.D.

Level thesis:degree_level

Dissertation

Discipline thesis:degree_discipline

Accountancy

Grantor

University of Illinois at Urbana-Champaign

Year dc:date

2015

Author dc:creator

• Choi, Jong-Hag

Contributors dc:contributor

• Ziebart, David A.

• Business Administration, Accounting

Language dc:language

eng

Identifier

(MiAaPQ)AAI9955599

OAI identifier oai:identifier

oai:www.ideals.illinois.edu:2142/87173