TITLE:
How Inflation Affects the Management Earnings Forecasts
AUTHORS:
Jingyuan Zou
KEYWORDS:
Management Earnings Forecast, Inflation, Voluntary Information Disclosure
JOURNAL NAME:
American Journal of Industrial and Business Management,
Vol.9 No.1,
January
7,
2019
ABSTRACT: I use 2005-2017 Shenzhen and Shanghai’s A-share
listed company’s quarterly earnings forecasts data as sample to perform multiple
regression analysis. I find that when inflation rate rises, not only management’s
possibility of making earnings
forecasts but
also the precision and accuracy of management forecasts declines, ceteris paribus. Furthermore,
I also find
that when inflation rate rises, the state-owned nature of enterprises will
aggravate the decline in the precision and accuracy
of listed companies’ earnings forecasts. In the unique context of semi-mandatory
disclosure rules in China, if companies voluntarily disclose more performance-related
information, it usually means that the managers are more capable, more
confident. Therefore, this voluntary behavior can alleviate the decline in the precision
and accuracy of the earnings forecast brought by inflation. Finally, I find that the precision and accuracy
of the earnings
forecasts will further decline for companies with higher debt ratios, indicating
that liabilities may be one of the paths of inflation affecting voluntary
information disclosure.