Management Sales Forecasts and Firm Market Power

Forthcoming in Journal of Accounting, Auditing & Finance

Posted: 9 Aug 2015 Last revised: 31 Mar 2019

See all articles by Andrew Acito

Andrew Acito

Virginia Tech

David Folsom

University of Texas at El Paso - Department of Accounting & Information Systems

Rong Zhao

University of Calgary

Date Written: February 15, 2019

Abstract

We investigate whether a firm’s market power within its product market affects management sales forecast behavior. Our examination of the relation between market power and management sales forecasts is motivated by the notion that sales forecasts differ from other types of forecasts because sales forecasts provide investors and competitors with a more transparent signal of a firm’s short-term demand expectations and its immediate actions in the product market than other forecasts. Thus, we first provide evidence consistent with sales forecasts containing unique information about future sales and evidence consistent with this information being related to competitor pricing and output decisions. We then find evidence that higher market power, proxied by excess margin, is associated with a higher likelihood of issuing sales forecasts after controlling for industry-level competition effects and earnings forecast behavior. Overall, our findings are consistent with higher-market-power firms being more willing to publicly disclose sales forecast information.

Keywords: sales guidance, management forecasts, market power, voluntary disclosure, product market competition

JEL Classification: M40, M41

Suggested Citation

Acito, Andrew and Folsom, David and Zhao, Rong, Management Sales Forecasts and Firm Market Power (February 15, 2019). Forthcoming in Journal of Accounting, Auditing & Finance, Available at SSRN: https://ssrn.com/abstract=2641045 or http://dx.doi.org/10.2139/ssrn.2641045

Andrew Acito (Contact Author)

Virginia Tech ( email )

Blacksburg, VA 24060
United States
3193211306 (Phone)

David Folsom

University of Texas at El Paso - Department of Accounting & Information Systems ( email )

University Library - Acquisitions Department
500 West University Avenue
El Paso, TX 79968
United States

Rong Zhao

University of Calgary ( email )

2500 University Drive, NW
Calgary, Alberta T2N 1N4
Canada
403-220-2568 (Phone)
403-210-2217 (Fax)

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