Do Analysts Act Strategically to Induce Management Guidance? Theory and Evidence.
详细信息
文摘
This dissertation provides an alternative explanation for the well documented walk-down pattern in analyst forecasts,assuming that analysts strive to improve their most recent forecast accuracy and that it is more costly for managers to fall short of analyst forecasts than to exceed them by an equal amount. Using a simple analytical framework,I explicitly model the endogeneity in an analysts initial forecast,revised forecast accuracy and managerial incentive to meet or beat a forecast. This parsimonious model provides several empirical predictions about the interaction between analysts forecasts and managers guidance decisions that are consistent with empirical findings,such as that guided forecasts are more accurate on average and managers are more likely to guide when initial forecasts are too high. Most interestingly,the model predicts that,in equilibrium,analysts may strategically report their favorable forecasts only,in an effort to induce managers to guide. Therefore,initial forecasts are optimistic,though analysts always report truthfully since we observe only a censored distribution of forecasts,conditional on managers propensity to guide. This alternative explanation for initial optimism motivates my empirical prediction: analysts initial forecasts are more optimistic for firms that are less likely to guide. In Chapter Three,I empirically test the predictions of my model. Using data from the post-regulation fair disclosure period post-reg FD),I find that,for firms that are less likely to provide guidance,analysts initial forecasts are more optimistic. This is consistent with my models prediction that when the propensity to guide depends on the initial forecast,analysts rationally release high forecasts in order to induce management guidance. Examination of a subset of firms whose guidance decisions are unlikely to be influenced by analyst forecasts suggests that this relation is not linear. Specifically,I find that the negative relation between initial optimism and management guidance does not exist for firms that guide regularly or rarely ceiling,floor effects). To further test my finding that analysts strategically report in order to elicit managers information,I examine how analysts revise their forecasts in response to management guidance. I show that analysts tend to revise their forecasts upward when managers do not guide as expected. Taken together,these findings suggest that the well documented walk-down pattern in analyst forecasts may arise endogenously as an analyst equilibrium strategy,in an effort to extract managers information.