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What Do Management Earnings Forecasts Convey About the Macroeconomy?
Author(s) -
BONSALL SAMUEL B.,
BOZANIC ZAHN,
FISCHER PAUL E..
Publication year - 2013
Publication title -
journal of accounting research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 6.767
H-Index - 141
eISSN - 1475-679X
pISSN - 0021-8456
DOI - 10.1111/1475-679x.12007
Subject(s) - earnings , economics , point (geometry) , voluntary disclosure , monetary economics , business , finance , mathematics , geometry
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.