Does Business Strategy Impact a Firm's Management Earnings Forecasts?

Abstract

Abstract:

This paper investigates whether and how the business strategy and its categories impose influence on management earnings forecasts based on the sample of China A-share listed firms during 2006-2015. Based on Miles and Snow's (1978, 2003) strategy typologies, we divide the listed firms into three categories:prospectors, analyzers and defenders. We empirically examine the relationship between firms' management earnings forecasts and business model. Our empirical results show that the prospector firms are more likely to disclose voluntarily management earnings forecasts but with less precise (e.g. more qualitative description and range estimation) and less accurate forecasts than defender firms. These empirical results are robust after controlling possible endogenous problems. The research conclusion shows that business strategy can impose significant impact on the management earnings forecasts. This study extends current literature relating to both business strategy and management earnings forecasts and has important implications for investors and regulators to deeply understand the firms' management earnings forecasts. Moreover, this study has policy implication for improving earnings forecasts system.

Key words: business strategy, information disclosure, management earnings forecasts

Wang Yutao, Duan Mengran. Does Business Strategy Impact a Firm's Management Earnings Forecasts?[J]. , 2019, 31(2): 200-213.

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