Article ID Journal Published Year Pages File Type
1005059 The International Journal of Accounting 2011 23 Pages PDF
Abstract

Listed firms in Japan are effectively compelled to report management forecasts of sales, ordinary income, and net income along with actual earnings and sales each year. Prior studies report that Japanese managers tend to announce optimistic forecasts of earnings. We show that a large part (61.6%) of the overall optimistic bias in management earnings forecasts in Japan can be explained by loss forecast avoiding behavior of a small fraction (5.25%) of firms. Such behavior is caused in part by the view of the main bank and power group that the management forecast of earnings is the manager's earnings target. Our findings suggest that the Japanese stock market recognizes such loss forecast avoidance and accordingly discounts new information in management forecasts.

Related Topics
Social Sciences and Humanities Business, Management and Accounting Accounting
Authors
, , ,