Mobility

Implicit/Explicit Incentives And Management Earnings Forecasts

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Executive Summary

This paper examine the relationship between implicit/explicit incentives and the likelihood of management earnings forecasts. Implicit incentives arising from managerial career concerns are measured by CEO age and CEO gender. Explicit incentives are measured by the CEO's proportion of equity compensation and CEO's equity holding. This paper also finds that both implicit and explicit incentives are associated with a higher likelihood of management earnings forecasts especially for good news. For bad news, CEO age is not associated with a higher likelihood of management earnings forecasts, indicating that voluntary disclosure of bad news is likely due to litigation concerns. The paper finally shows that both implicit and explicit incentives are associated with quantitative forecasts, and not associated with qualitative forecasts.

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