Essays On Earnings Guidance
The first chapter of this dissertation examines the association between guidance frequency, guidance properties, and market reactions. The results suggest that the characteristics and market responses to guidance issued by occasional and frequent guiders differ. Compared to occasional guiders, frequent guiders issue guidance in a timelier manner and their guidance issuances are less optimistically biased, more accurate, and more precise. Controlling for the amount of news issued, the market reaction to guidance issued by frequent guiders is more positive for good news and less negative for bad news, consistent with market awareness of the differences in guidance properties between frequent and occasional guiders. Overall, the results are consistent with frequency being an important classificatory variable. The second chapter examines whether investors and analysts recognize differences in individual managers' guidance accuracy and bias, and if they tailor their responses to management guidance. The results suggest that investors react more strongly and assign more credibility to managers who have greater guidance accuracy, and that investors adjust for guidance bias by reacting more positively (less negatively) to good (bad) news guidance issued by managers who are more pessimistic. However, the results for the changes in analysts' consensus forecasts suggest that analyst experience plays an important role in their responses to management guidance. I find that in their forecast revisions, analysts adjust for managers' guidance accuracy and bias only if the analysts themselves have sufficient forecasting experience.
dissertation or thesis