Cost Stickiness and Management’s Issuance of Earnings Forecasts

Authors

  • Jing Dai Southwestern University of Finance and Economics
  • Rong Huang Baruch College
  • Yan Yan Fairleigh Dickinson University

DOI:

https://doi.org/10.33423/jabe.v20i6.371

Keywords:

Business, Economics, Finance, Management

Abstract

This study investigates how firms’ asymmetric cost behavior affects managers’ decision to issue earnings forecasts. Cost stickiness reflects managers’ deliberate resource adjustment decisions and increases information asymmetry between managers and corporate outsiders. Therefore, as cost stickiness increases, managers are more likely to convey their private information to public through earnings forecasts to reduce information asymmetry. Consistent with our prediction, we find a positive association between cost stickiness and managers’ propensity to issue earnings forecasts, and this positive association is more pronounced for long-horizon forecasts than short-horizon forecasts.

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Published

2018-10-01

How to Cite

Dai, J., Huang, R., & Yan, Y. (2018). Cost Stickiness and Management’s Issuance of Earnings Forecasts. Journal of Applied Business and Economics, 20(6). https://doi.org/10.33423/jabe.v20i6.371

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Section

Articles