What Do Management Earnings Forecasts Convey About the Macroeconomy?


  • Accepted by Douglas Skinner. We would like to thank an anonymous referee, Andrew Acito, Dan Givoly, Luzi Hail, Brian Miller, Karl Muller, Darren Roulstone, Abbie Smith, Andy Van Buskirk, Greg Waymire, and conference participants at the 22nd Annual Conference on Financial Economics and Accounting, the 2012 FARS Midyear Meeting, and the 2012 Journal of Accounting Research Conference for helpful comments and suggestions.


We decompose quantitative management earnings forecasts into macroeconomic and firm-specific components to determine the extent to which voluntary disclosure provided by management has macroeconomic information content. We provide evidence that the forecasts of bellwether firms, which are defined as firms in which macroeconomic news explains the greatest amount of variation in the forecasts, provide timely information to the market about the macroeconomy when bundled with earnings announcements. Further, we show that bellwether firms provide timely information about both industry-specific events and broader economic events. Finally, we document that the macroeconomic news in individual forecasts is more pronounced for bad news and point forecasts.