CEO And CFO Career Penalties To Missing Quarterly Analysts Forecasts

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Executive Summary

The authors find that missing the quarterly analyst consensus earnings forecast is associated with career penalties in the form of a reduced bonus, smaller equity grants, and a greater chance of forced dismissal for both CEOs and CFOs during the period 1993-2004. These results are obtained after controlling for several proxies for earnings and stock return performance suggesting that boards appear to penalize managers for failing to meet analysts' quarterly earnings forecasts per se. Career penalties for failing to meet the analyst consensus estimate are no different for firms where forecasting earnings is harder. Moreover, such penalties have increased in the post-SOX period.

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