The effects of earnings management, inside information, and voluntary disclosure choice on the accuracy of management earnings forecasts

This study examines the links between management forecast accuracy and earnings management, inside information, and motives for issuing a forecast. Our results provide empirical evidence of a link between managers' private information and their forecast accuracy. In addition, we find evidence supporting the links between forecast accuracy and both self-selection to forecast and discretionary accruals. However, the evidence varies across type of forecast (good or bad news) and whether the forecast is an initial forecast or the continuance of previous forecasting behavior. Overall, managers' forecast accuracy is linked to a combination of their inside information regarding performance, their incentive to self-select to forecast, and their ability to manage earnings.