Forecast Withdrawals and Reporting Reputation

• DOI: 10.2308/tar-2020-0303
• Publication Date: 2022-02-15T22:11:41Z
• Authors: Nathan T. Marshall; A. Nicole Skinner
• Keywords: Affect

ABSTRACT While accounting research has extensively examined initial guidance disclosures, the disclosures that managers make when forecasts become materially inaccurate have received much less attention. These updates are unique because communicating their no longer correct. In this context, we examine how earnings forecast withdrawals affect managers' reporting reputation, relative to revisions and nondisclosure. face immediate negative market consequences after withdrawals, they enjoy reputational benefits (in form of improved credibility) in long run resume. contrast, reputation does not improve for who revise or those choose update at all. Difference-in-differences analyses confirm incremental boost credibility is associated with withdrawals. This evidence suggests disclosing what do know may be as important building a reputation.