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Analyst Herding Around Management Forecasts

In: International Perspectives on Accounting and Corporate Behavior

Author

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  • Mikiharu Noma

    (Hitotsubashi University)

Abstract

This paper examines the effect of management forecasts on analyst forecasts in Japan. Almost all listed firms in Japan provide management forecasts. Thus, it is possible to investigate the relationship between management and analyst forecasts for Japanese firms without any special consideration of reasons behind the issuance of management forecasts. We first show that management forecasts provided by managers at the time of release of the prior year’s annual and current semi-annual financial results are slightly higher than analyst forecasts. The results suggest that managers have incentives to provide forecasts that exceed analyst forecasts. We then analyze the daily differences between management and analyst forecasts to investigate any convergence between the two forecasts upon the release of management forecasts. We conclude that analysts herd around management forecasts in Japan and tend to trust management forecasts because they believe that managers in Japanese firms are highly disciplined.

Suggested Citation

  • Mikiharu Noma, 2014. "Analyst Herding Around Management Forecasts," Advances in Japanese Business and Economics, in: Kunio Ito & Makoto Nakano (ed.), International Perspectives on Accounting and Corporate Behavior, edition 127, pages 261-283, Springer.
    • Handle: RePEc:spr:advchp:978-4-431-54792-1_12
    DOI: 10.1007/978-4-431-54792-1_12
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    Cited by:

    1. Shota Otomasa & Atsushi Shiiba & Akinobu Shuto, 2015. "Management Earnings Forecasts as a Performance Target in Executive Compensation Contracts," CARF F-Series CARF-F-368, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.

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