To Blame or not to Blame: Analysts' Reactions to External Explanations for Poor Financial Performance
To Blame or not to Blame: Analysts' Reactions to External Explanations for Poor Financial Performance
Author(s):
Year: 2004
Paper Number:
GBS-ACC-2004-002
Goizueta Department:
Accounting
Full text available as: |
Abstract
Managers often provide self-serving disclosures that blame poor financial performance on temporary, external factors. Results of an experiment conducted with 124 financial analysts suggest that when analysts perceive such disclosures as plausible, they provide higher earnings forecasts and stock valuations than if the explanation had not been provided. However, we also show that these disclosures can backfire if analysts find them implausible. Specifically, implausible external explanations for poor performance lead analysts to provide lower earnings forecasts and assess a higher cost of capital than if the explanation had not been provided.
| Keywords: | Voluntary disclosure, management explanations, financial analysts' earnings forecasts, management reputation, financial reporting credibility |
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| Subjects: | Business > Accounting |
| Notes: | Registration required to access free full-text papers. jan_barton@bus.emory.edu Emory University - Department of Accounting Goizueta Business School 1300 Clifton Road Atlanta , GA 30322 United States 404-727-6398 (Phone) 404-727-6313 (Fax) Molly_Mercer@bus.emory.edu Emory University - Department of Accounting Goizueta Business School 1300 Clifton Road Atlanta , GA 30322 United States 404-727-7079 (Phone) 404-727-6313 (Fax) |
| Deposited On: | 03 August 2005 |
| Alternative Locations: | http://papers.ssrn.com/sol3/papers.cfm?abstract_id=556834 |
