The Valuation Consequences of Meeting and Beating Expectations: Implications of Management Guidance.
| Citations: | 1 - 0 self |
BibTeX
@MISC{Graduate_thevaluation,
author = {Mohan Venkatachalam Graduate and Mohan Venkatachalam and Qian Wang},
title = {The Valuation Consequences of Meeting and Beating Expectations: Implications of Management Guidance.},
year = {}
}
Bookmark
 |
 |
 |
 |
 |
 |
OpenURL
Abstract
: This study examines whether it is cost beneficial for managers to guide analysts' forecasts downward and subsequently meet or beat expectations. We provide evidence on the cost benefit trade-offs by examining the weights placed by market participants on forecast revisions and forecast errors in determining share prices. We find that the cost of lowering expectations, i.e., market reaction to negative forecast revision, is lower than the benefits from reporting a positive earnings surprise. Thus, we find that beating expectations by lowering expectations is cost beneficial. However, in recent years the net benefits to such a strategy are no longer significant. We also find that capital market participants do not reward all firms that meet expectations. In fact, firms that guide analyst forecast downward and subsequently meet expectations experience negative abnormal returns. The Valuation Consequences of Meeting and Beating Expectations: Implications of Management Guidance. 1. Intro...
