Abstract
We study the effects of terrorist attacks on firms’ long-term annual management earnings forecasts bias. We find that the managers of firms located closer to the epicenters of attacks are more likely to issue optimistic long-term annual earnings forecasts relative to the managers of a control group of unaffected firms. The exposure effect is stronger for more severe terrorist events, and firms with more uncertain fundamentals and less geographic diversification. In addition, we document that managers’ forecast optimism intensifies for firms with stronger negative stock market reaction to the terrorist event, for CEOs with higher ability and for companies that are more likely to issue equity or engage in acquisitions following the terrorist event. Overall, our results are consistent with the idea that long-term annual earnings forecasts are used by managers to counterbalance the short-term pessimistic response to terrorist attacks.
Original language | English |
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Article number | 106943 |
Journal | Journal of Accounting and Public Policy |
Volume | 41 |
Issue number | 3 |
DOIs | |
Publication status | Published - 1 May 2022 |
Keywords
- Forecast horizon
- Investor sentiment
- Management forecasts
- Terrorist attacks
ASJC Scopus subject areas
- Accounting
- Sociology and Political Science