Journal of Accounting and Economics Vol. 47 No. 3 2009
The impact of conservatism on management earnings forecasts
Abstract
We investigate the empirical relation between a firm's accounting conservatism and management's issuance of quantitative earnings forecasts. Using three measures of conservatism from prior literature, along with two aggregate measures, we find a negative association between conservatism and the frequency, specificity, and timeliness of management forecasts. The results are robust to estimating the regression in changes, using firm fixed-effects, and using a two-stage instrumental variables approach. Overall, these results suggest that accounting conservatism acts as a substitute for management forecasts by decreasing information asymmetry in the market and reducing potential litigation through the timely reporting of bad news.
- DOI
- 10.1016/j.jacceco.2009.01.001
- Volume
- 47
- Issue
- 3
- Pages
- 192-207
- Language
- en
- Sources
- bibtex:phds-export.bib crossref openalex