Flashcards in Analysts’ Inﬂuence on Managers’ Guidance Deck (7)
Ways analysts to communicate their demands for disclosure:
1) analysts may request guidance that managers do not already provide
2) analysts may ask (or not ask) questions about guidance the managers have provided
- express information requests to managers privately
Six of the most common types of guidance
Capital expenditures (CAPEX); cash ﬂows; earnings before interest, taxes, depreciation and amortization (EBITDA); earnings per share (EPS); operating margin; and tax rates (tax).
Main findings (with %):
1) When analysts ask for a type of guidance that managers have not previously provided, managers are approximately 3 percent more likely to provide this type of guidance in future quarters.
2) When analysts do not ask about a type of guidance that managers previously provided, managers are approximately 4 percent less likely to provide that guidance in future quarters.
Economically meaningful findngs:
1) marginal effects are large, given that the unconditional probability of providing a forecast is 20 percent
2) analysts’ inﬂuence on guidance is long-lasting, although its marginal effect declines over time
3) analysts’ requests (disinterest) also lead to guidance being more (less) likely in earnings announcements, consistent with the view that managers learn from analysts’ feedback
Company specific findings:
1) both analysts’ requests and managers’ guidance are less likely for ﬁrms with information problems (small companies, companies with low or volatile earnings, and companies in industries in which guidance is infrequent)
2) analysts’ feedback is more informative to managers of companies with bad news
Managers’ guidance is incremental to ...
institutional investor holdings, industry-level disclosure patterns, ﬁrm characteristics, analysts’ prior requests for guidance, managers’ prior guidance, and analysts’ questions on the same topic that do not request guidance