An examination of the determinants of Management Earnings Forecasts Consistency

This paper examines whether firms engage in consistent pattern of management earnings forecast characteristics and which determinants most likely explain the phenomenon. Building on previous literature on guidance characteristics, I develop a measure of consistency considering three attributes: precision, level of disaggregation and additional qualitative information. I classify firm as “consistent” based on persistence of characteristics over time. The paper investigates management earnings forecasts from a cross-sectional perspective and attempts to shed new light on the iterative nature of management earnings forecasts characteristics which appear to be the least well-understood component of the forecasting activity. Preliminary results suggest that the experience of the CEO and the cumulative abnormal returns contribute to justify the choice of providing earnings forecasts with identical characteristics from one year to the next.