Publication Type

Journal Article

Publication Date

3-2016

Abstract

This paper examines how overconfidence affects the properties of management forecasts. Using both the ‘over‐optimism’ and ‘miscalibration’ effects of overconfidence to generate our predictions, we examine three research questions. First, we examine whether overconfidence increases the likelihood of issuing a forecast. Second, we examine whether overconfidence increases the amount of optimism in management forecasts. Third, we examine whether overconfidence increases the specificity and precision of the forecast. We use both options‐ and press‐based measures to proxy for individual overconfidence, and find support for all three research questions. We further find that the results are concentrated among firms that provide forecasts sporadically, consistent with overconfidence playing a stronger role when managers have more flexibility in determining forecast properties.

Keywords

overconfidence, voluntary forecast, earnings management

Discipline

Accounting

Research Areas

Corporate Reporting and Disclosure

Publication

Contemporary Accounting Research

Volume

33

Issue

1

First Page

204

Last Page

227

ISSN

0823-9150

Identifier

10.1111/1911-3846.12144

Publisher

AAA

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Additional URL

http://dx.doi.org/10.1111/1911-3846.12144

Included in

Accounting Commons

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