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

Copyright Owner and License

Authors

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

https://ssrn.com/abstract=1545864

Share

COinS