全部 标题 作者
关键词 摘要


How Inflation Affects the Management Earnings Forecasts

DOI: 10.4236/ajibm.2019.91003, PP. 21-48

Keywords: Management Earnings Forecast, Inflation, Voluntary Information Disclosure

Full-Text   Cite this paper   Add to My Lib

Abstract:

I use 2005-2017 Shenzhen and Shanghai’s A-share listed company’s quarterly earnings forecasts data as sample to perform multiple regression analysis. I find that when inflation rate rises, not only management’s possibility of making earnings forecasts but also the precision and accuracy of management forecasts declines, ceteris paribus. Furthermore, I also find that when inflation rate rises, the state-owned nature of enterprises will aggravate the decline in the precision and accuracy of listed companies’ earnings forecasts.

References

[1]  Ajinkya, B. and Gift, M. (1984) Corporate Managers’ Earnings Forecasts and Symmetrical Adjustments of Market Expectations. Journal of Accounting Research, 22, 425-444.
https://doi.org/10.2307/2490657
[2]  Schoenfeld, J. (2017) The Effect of Voluntary Disclosure On Stock Liquidity: New Evidence from Index Funds. Journal of Accounting and Economics, 63, 51-74.
https://doi.org/10.1016/j.jacceco.2016.10.007
[3]  Kim, O. and Verrecchia, R.E. (2001) The Relation among Disclosure, Returns, and Trading Volume Information. The Accounting Review, 76, 633-654.
https://doi.org/10.2308/accr.2001.76.4.633
[4]  Skinner, D. (1994) Why Do Firms Voluntarily Disclose Bad News? Journal of Accounting Research, 32, 38-60.
https://doi.org/10.2307/2491386
[5]  Hutton, A. and Stocken, P. (2009) Prior Forecasting Accuracy and Investor Reaction to Management Earnings Forecasts. Working Paper, Boston College and Dartmouth University.
[6]  Cotter, J., Tuna, I. and Wysocki, P.D. (2006) Expectations Management and Beatable Targets: How Do Analysts React to Public Earnings Guidance? Contemporary Accounting Research, 23, 593-624.
https://doi.org/10.1506/FJ4D-04UN-68T7-R8CA
[7]  Hirst, D., Koonce, L. and Venkataraman, S. (2008) Management Earnings Forecasts: A Review and Framework. Accounting Horizons, 22, 315-338.
https://doi.org/10.2308/acch.2008.22.3.315
[8]  Skinner, D. (1997) Earnings Disclosures and Stockholder Lawsuits. Journal of Accounting and Economics, 23, 249-292.
https://doi.org/10.1016/S0165-4101(97)00010-4
[9]  Doepke, M. and Schneider, M. (2006) Inflation and the Redistribution of Nominal Wealth. Journal of Political Economy, 114, 1069-1097.
https://doi.org/10.1086/508379
[10]  Modigliani, F. and Cohn, R.A. (1979) Inflation, Rational Valuation and the Market. Financial Analysts Journal, 35, 24-44.
https://doi.org/10.2469/faj.v35.n2.24
[11]  Chordia, T. and Shivakumar, L. (2005) Inflation Illusion and Post Earnings Announcement Drift. Journal of Accounting Research, 43, 521-556.
https://doi.org/10.1111/j.1475-679X.2005.00181.x
[12]  Basu, S., Markov, S. and Shivakumar, L. (2010) Inflation, Earnings Forecasts, and Post-Earnings Announcement Drift. Review of Accounting Studies, 15, 403-440.
https://doi.org/10.1007/s11142-009-9112-9
[13]  Lin, S. (2009) Inflation and Real Stock Returns Revisited. Economic Inquiry, 47, 783-795.
https://doi.org/10.1111/j.1465-7295.2008.00193.x
[14]  Bekaert, G. and Wang, X. (2010) Inflation Risk and the Inflation Risk Premium. Economic Policy, 25, 755-806.
https://doi.org/10.1111/j.1468-0327.2010.00253.x
[15]  Konchitchki, Y. (2011) Inflation and Nominal Financial Reporting: Implications for Performance and Stock Prices. The Accounting Review, 86, 1045-1085.
https://doi.org/10.2308/accr.00000044
[16]  Rao, P., Yue, H. and Jiang, G. (2016) Inflation Expectations and Corporate Inventory Adjustment Behavior. The Economics (Quarterly), 1, 499-526.
[17]  Rao, P. and Luo, Y. (2016) How Inflation Affects Stock Returns—Based on the Perspective of Debt Financing. Journal of Financial Research, 7, 160-175.
[18]  Qiang, C., Ting, L. and Heng, Y. (2013) Managerial Incentives and Management Forecast Precision. The Accounting Review, 88, 1575-1602.
https://doi.org/10.2308/accr-50506
[19]  Nagar, V., Nanda, D. and Wysocki, P. (2003) Discretionary Disclosure and Stock-Based Incentives. Journal of Accounting and Economics, 34, 283-309.
https://doi.org/10.1016/S0165-4101(02)00075-7
[20]  Dempsey, S.J. (1989) Predisclosure Information Search Incentives, Analyst Following, and Earnings Announcement Price Response. Accounting Review, 64, 748-757.
[21]  Ajinkya, B., Bhojraj, S. and Sengupta, P. (2005) The Association between Outside Directors, Institutional Investors and the Properties of Management Earnings Forecasts. Journal of Accounting Research, 43, 343-374.
https://doi.org/10.1111/j.1475-679x.2005.00174.x
[22]  Mei, F. and Adam, S.K. (2010) Once Bitten, Twice Shy: The Relation between Outcomes of Earnings Guidance and Management Guidance Strategy. The Accounting Review, 85, 1951-1984.
https://doi.org/10.2308/accr.2010.85.6.1951
[23]  Hilary, G. and Hsu, C. (2011) Endogenous Overconfidence in Managerial Forecasts. Journal of Accounting and Economics, 51, 300-313.
https://doi.org/10.1016/j.jacceco.2011.01.002
[24]  Hribar, P. and Yang, H. (2016) CEO Overconfidence and Management Forecasting. Contemporary Accounting Research, 33, 204-227.
https://doi.org/10.1111/1911-3846.12144
[25]  Ritter, J. and Warra, R.S. (2002) The Decline of Inflation and the Bull Market of 1982-1999. Journal of Financial and Quantitative Analysis, 37, 29-61.
https://doi.org/10.2307/3594994
[26]  Li, Q., Wu, S. and Wang, H. (2015) Inflation Expectation and Corporate Bank Debt Financing. Journal of Financial Research, 11, 124-141.
[27]  Li, W. and Zheng, M. (2016) Inflation Expectations, Corporate Growth and Corporate Investment. Statistical Research, 5, 34-42.
[28]  Rao, P. and Zhang, H. (2015) Inflation Expectations and Corporate Cash Holdings. Journal of Financial Research, 1, 101-116.
[29]  Luo, Y., Rao, P. and Yue, H. (2018) The Microscopic Interpretation of “Inflation Illusion”: The Perspective of Earnings Quality. The Journal of World Economy, 4, 124-149.
[30]  Oliver, K. and Verrecchia, R.E. (1991) Trading Volume and Price Reactions to Public Announcements. Journal of Accounting Research, 29, 302-321.
https://doi.org/10.2307/2491051
[31]  Subramanyam, K.R. (1996) Uncertain Precision and Price Reactions to Information. The Accounting Review, 71, 207-220.
[32]  Lu, Z. and Zhang, H. (2009) Accounting Standards Reform and the Decision Usefulness of Subsidiary Earnings Information—Empirical Evidence from Chinese Capital Market. Accounting Research, 5, 20-28.
[33]  Huang, Q., Cheng, M., Li, W. and Wei, M. (2014) Listing Approach, Political Favours and Earnings Quality—Evidence from Chinese Family Firms. Accounting Research, 7, 43-49.
[34]  Zhang, X., Zhang, H. and Xia, D. (2012) Executives Holding Shares, Timing Disclosure and Market Reaction. Accounting Research, 6, 54-60.
[35]  Baik, B., Farber, D.B. and Lee, S. (2011) CEO Ability and Management Earnings Forecasts. Contemporary Accounting Research, 28, 1645-1668.
https://doi.org/10.1111/j.1911-3846.2011.01091.x

Full-Text

comments powered by Disqus