This study examines the relationship between a firm??s degree of multinationality
and its managers?? earnings forecasts. Firms with a high degree of multinationality are
subject to greater uncertainty regarding earnings forecasts due to the additional risk
resulting from the more complex multinational environment. Prior research demonstrates
that firms that fail to meet or beat market expectations experience disproportionate
market losses at earnings announcement dates. The complexities and greater uncertainty
resulting from higher levels of multinationality are expected to be negatively associated
with management earnings forecast precision, accuracy, and bias (downward versus
upward).
Results of the study are mixed. Regarding forecast precision, two measures of
multinationality (foreign sales / total sales and the number of geographic segments) are
significantly negatively related to management earnings forecast precision. This was the
expected relationship. Regarding forecast accuracy, contrary to expectations, forecast
accuracy is positively related to multinationality, with regard to the number of
geographic segments a firm discloses. Regarding forecast bias, unexpectedly, two
measures of multinationality (foreign sales / total sales and number of countries withforeign subsidiaries) are significantly positively related to more optimistic management
earnings forecasts.
| Identifer | oai:union.ndltd.org:tamu.edu/oai:repository.tamu.edu:1969.1/2272 |
| Date | 29 August 2005 |
| Creators | Runyan, Bruce Wayne |
| Contributors | Smith, L. Murphy |
| Publisher | Texas A&M University |
| Source Sets | Texas A and M University |
| Language | en_US |
| Detected Language | English |
| Type | Book, Thesis, Electronic Dissertation, text |
| Format | 260670 bytes, electronic, application/pdf, born digital |
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