Macroeconomic uncertainty and management forecast accuracy

2020・23

要約

This study examines the effect of macroeconomic uncertainty on the accuracy of management earnings forecasts. Focusing on Japanese management earnings forecasts, which are effectively mandated, I find that during periods of high macroeconomic uncertainty, firms tend to report accurate earnings forecasts. I also find that macroeconomic uncertainty lessens optimistic but not pessimistic errors. These findings are consistent with the scenario that managers try to avoid missing their forecasts or revising their forecasts downward because investors place greater weight on bad news when macroeconomic uncertainty is high. Consistent with this scenario, additional analyses reveal that firms experience a larger decrease in stock prices when they miss their forecasts or revise their forecasts downward under high macroeconomic uncertainty. Moreover, these findings are robust when I use sales forecasts, operating income forecasts, and ordinary income forecasts (i.e., income before extraordinary items, special items, and taxes) instead of net income forecasts. The evidence presented in this study suggests that the usefulness of management forecasts does not decrease even when macroeconomic uncertainty is high.

Keywords: macroeconomic uncertainty, volatility index, management earnings forecast, Japan
JEL Classification: M41