Publication Type
Working Paper
Publication Date
4-2012
Abstract
Different firms issue earnings guidance at dramatically different rates. We suggest that frequent guiders more likely represent a type of firm that is attempting to develop a reputation for enhanced disclosures through their guidance issuances. Furthermore, the desire to build a reputation and the opportunities to learn provided by issuing more frequent guidance should translate into frequent guiders providing higher quality guidance than occasional guiders. We examine our hypotheses in three stages. First, we find that guidance frequency is positively correlated with variables associated with reputation with capital market participants and reputation in product and labor markets. Second, our cross-sectional analysis shows that frequent guiders provide guidance that is more accurate and specific, timelier, and less optimistically biased. Third, controlling for overall time trends, we find that firms display improvements over time in their guidance properties. Overall, our results are consistent with the reputation-building and learning-by-doing arguments.
Keywords
management forecasts, earnings guidance, guidance frequency, learning
Discipline
Accounting | Business Law, Public Responsibility, and Ethics
Research Areas
Corporate Governance, Auditing and Risk Management
First Page
1
Last Page
50
Citation
BHOJRAJ, Sanjeev; LIBBY, Robert; and YANG, Holly I..
Guidance Frequency and Guidance Properties: The Effect of Reputation-Building and Learning-by-Doing. (2012). 1-50.
Available at: https://ink.library.smu.edu.sg/soa_research/1164
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://ssrn.com/abstract=1545864