The Impact of Management Earning Forecast on Non-systematic Risk

Authors

1 School of Economic and social Sciences, Bu Ali Sina University, Hamedan, Iran.

2 School of Accounting and Management, Shahid Beheshti University, Tehran

3 School of Management, Islamic Azad University, Arak Branch.

Abstract

 
This research explores the relationship between management earnings forecasts and firm’s non-systematic risk. This study has collected data from 76 firms listed on Tehran Stock Exchange from 2005 to 2012 and has tested the research hypotheses by utilizing the regression coefficient analysis. Many of the changes in risks of the corporates in the capital markets are influenced by various information that corporates are offering to the market. Some of these sources of information are estimations and forecasts. So verification of these predictions, and also reaction of investors to the issuance of these forecasts will be studied. Considering the reaction towards corporate's risks as a dependent variable to the presented earnings forecasts by managers, the research results indicate that there is a significant and negative relationship between the accuracy and frequency of earnings forecasts.
 

Keywords

References

  1.  اسدی، غبیات، م. (1393). «تأثیر محافظه‌کاری بر پیش‌بینی‌های مدیریت از سود». بررسی‌های حسابداری و حسابرسی، شماره 1، 19 -38.
  2. سینایی، ح؛ سلگی، م؛ محمدی، ک. (1390). «تأثیر فرصت‌های رشد بر رابطه بین ساختار سرمایه، سود تقسیمی و ساختار مالکیت با ارزش شرکت». پژوهش‌های حسابداری مالی، سال سوم، شمارة چهارم، 87-102.
  3. عبده تبریزی، ح. (1377). «مجموعه مقالات مالی و سرمایه‌گذاری». تهران، نشر آگه پائیز.
  4. مشایخ، شوشاهرخی، س. (1386). «بررسی دقت پیش‌بینی سود توسط مدیران و عوامل مؤثر بر آن». بررسی‌های حسابداری و حسابرسی، شماره 82، 65 -82.
  5. مشایخی، ب؛ مطمئن، م. (1391). «ریسک سیستماتیک و محافظه‌کاری مشروط». تحقیقات مالی،  15 (1)، 109-128.
  6. مشکی، موعاصی ربانی، م. (1390). «بررسی رابطه بین خطای پیش‌بینی سود مدیریت و بازده غیرعادی و ریسک سیستماتیک شرکت‌های پذیرفته‌شده در بورس اوراق بهادار». بررسی‌های حسابداری و حسابرسی، شماره 66، 53 -68.
  7. Ajinkya, B., S. Bhojraj, and P. Sengupta. (2005). “The association between outside directors, institutional investors and properties of management earningsforecasts”. Journal of Accounting Research, 43:343-376.
  8. Anilowski, C., M. Feng, and D. J. Skinner. (2007). “Does earnings guidance affect market returns? The nature of information content of aggregate earnings guidance”. Journal of Accounting and Economics, 44: 36-63
  9. Ashbaugh-Skaife H., D. W. Collins, W. R. Kinney, and R. Lafond. (2009). “the effect of SOX internal control deficiencies on firm risk and cost of equity”. Journal of Accounting Research, 47: 1-43
  10. 10. Baginski، S.،Hassell، J.،& Kimbrough، M. (2002). “The Effect of LegalEnvironme-nt on Voluntary Disclosure: Evidence from Management EarningsForecasts Issued in U.S. and Canadian Markets”. The Accounting Revie, 77، 25-50.
  11. 11. Chan, K. & Chan, L. &Jegadeesh, N. &Lakonishok, J. (2006). “Earnings quality and Stock Returns”. Journal of business, forthcoming,
  12. 12. Coller, M., and T. L. Yohn. (1997). “Management Forecasts and Information Asymmetry: An Examinationof Bid-Ask Spreads”. Journal of Accounting Research, 35: 181-191.
  13. 13. Durnev, A., E. H. Kim. (2005). “to steal or not to steal: firm attributes, legal environment, and valuation”. The Journal of Finance 60: 1461–1493.
  14. 14. Diamond, D. W., and R. E. Verrecchia. (1991). “Disclosure, liquidity and the cost of capital”. The Journal of Finance, 46: 1325-1359.
  15. 15. Easley, D., O’Hara, M. (2004). “Information and the cost of capital”. Journal of Finance, 69, 1553–1583.
  16. 16. Francis, J., D. Nanda and P. Olsson. (2008). “voluntary disclosure, earnings quality and cost of capital”. Journal of Accounting Research, 46: 53-99.
  17. 17. Gounopoulos, D. (2004). “Accuracy of Management Earnings Forecasts in IPO Prosp-ectuses: Evidence From Athens Stock Exchange”. Working Paper, University of Surrey: United Kingdom
  18. 18. Graham, J., C. Harvey and S. Rajgopal. (2005). “The economic implications of corporate financial reporting”. Journal of Accounting and Economics, 40: 3-73
  19. 19. George, J. & Jiang, D. &Xu.Tong,Y. (2009). “The Information Content of IdiosyncraticVolatility”. Journal of financialand quantitative analysis, vol. 44, Pp, 1-28.
  20. 20. Hassell, J., Jennings, R., Lasser, D. (1988). “Management earning forecast: Their usefulness as a source of firm specific information to security analysts”. Journal of financial research, 11(4): 303-319.
  21. 21. Healy, P. and K. Palepu. (2001). “Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature”. Journal of Accounting and Economics, 31: 405-440.
  22. 22. Hirst, E., L. Koonce, and S. Venkataraman. (2008). “Management earnings forecasts: A review and framework”. Accounting Horizon, 22: 1055-1087.
  23. 23. Jensen, M., Meckling, W. )1976(. “Theory of the firm: managerial behavior, agency costs, and ownership structure”. Journal of Financial Economics, 3: 305-360.
  24. 24. Ferreira, M. and P. Laux, 2007. “Corporate governance, idiosyncratic risk and information flow”. The Journal of Finance, 62: 951-989.
  25. 25. Francis, J. &Lafond, R. & Olsson, p. &Schipper, K. (2005). “The Market Pricing of Accruals Quality”. Journal of Accounting and Economics, Vol. 39: pp, 295-327.
  26. 26. Lambert, R., C. Leuz and R. Verrecchia. (2007). “Accounting information, disclosure and the cost of capital”. Journal of Accounting Research, 45: 385-420.
  27. 27. Leuz, C. and R. Verrecchia. (2000). “The economic consequences of increased disclosure”. Journal of Accounting Research, 38: 91-124.
  28. 28. O’Hara, M., (2003). “Presidential address: liquidity and price discovery”. Journal of Finance, 58, 1335–1354.
  29. 29. Pastor, L., Veronesi, P. (2003). “Stock valuation and learning about profitability”. Journal of Finance, 58, 1749–1789.
  30. 30. King, R., G. Pownall and G. Waymire. (1990). “Expectations adjustment via timely earnings forecastdisclosure: Review, synthesis, and suggestions for future research”. Journal of Accounting Literature, 9: 113-144.
  31. 31. Rajgopal,S, Mohan, v. (2011). “Financial reporting quality and idiosyncratic return volatility”. Journal of Accounting and Economics, (5) pp 1–20.
  32. 32. Rogers, J. L., D. J. Skinner and A. V. Buskirk. (2009). “Earnings guidance and market uncertainty”. Journal of Accounting and Economics, forthcoming.
  33. 33. Skinner, D. (1994). “Why firms voluntarily disclose bad news”. Journal of Accounting Research, 32: 38-60.
  34. 34. Stephen R. Foerster, Stephen G. Sapp, Yaqi Shi. (2009). “The Impact of Management Earnings Forecasts on Firm Risk and Firm Value”. Working paper, Dicecenter (Available at SSRN: http://ssrn.com/)
Financial Management Strategy
Volume 2, Issue 2 - Serial Number 5
September 2014
Pages 121-136

Files

History

  • Receive Date: 15 April 2015
  • Revise Date: 30 May 2018
  • Accept Date: 15 April 2015

Share

How to cite

Statistics