Stickiness in Costs and Voluntary Disclosures: Evidence from Management Earnings Forecasts

We investigate the relationship between cost stickiness and management earnings forecasts

Mustafa Ciftci; Feras M. Salama

2017

Scholarcy highlights

  • Download citation file: We investigate the relationship between cost stickiness and management earnings forecasts
  • Prior research suggests that earnings are more volatile for sticky cost firms resulting in greater earnings forecast errors
  • Managers might refrain from issuing earnings forecasts for sticky cost firms because greater forecast errors might damage managers' credibility and adversely affect their job security
  • We find that cost stickiness is positively associated with management earnings forecast issuance, suggesting that the benefits outweigh the costs
  • We find a positive association between cost stickiness and management earnings forecast errors, suggesting that managers do not fully incorporate the negative implications of cost stickiness into their forecasts
  • We find that analysts' forecast errors for sticky cost firms are greater than managers'

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