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International Journal of Economics and Accounting (2 papers in press)
Do Managers Mimic Rivals Forecast Revisions? Evidence from Japan by Akihiro Yamada Abstract: When managers face uncertain business environments or enter a compensation contract that ties their firm to others behaviours, their management forecast disclosure may be affected by the behaviours of others. This study examines management earnings forecast revisions in Japan from the standpoint of herding behaviour theory. The results reveal the following. (1) Management earnings forecast revisions follow the mean values of preceding forecast revisions issued by firms in the same industry. (2) Mimicking behaviours are weaker when the number of days from the management earnings forecast release to the closing date decreases or when the mean value of rivals forecast revisions is negative. (3) Bold management earnings forecast revisions (i.e. that deviate significantly from the mean value of rivals forecast revisions) lead to improved forecast accuracy. The results suggest that analysts, policymakers, and investors should consider herding behaviours when they use management forecasts to make predictions. Keywords: management forecasts; forecast guidance; forecast revisions; forecast accuracy; forecast errors; herding behaviour; asymmetric herding; Japan.
Does Accounting Quality Impact the Cost of Capital? An Empirical Study on the German Capital Market by Martin Knipp, Jochen Zimmermann Abstract: In this paper we examine whether the accounting quality has an impact on the cost of capital of listed German firms from 1995 to 2014. The accounting quality is approximated by the amount of earnings management executed by the firms management. Earnings management is operationalised by measures according to Leuz et al. (2003) and the cost of capital is estimated by the capital asset pricing model (CAPM). By using fixed-effects regressions and variance analyses on portfolios referring the research area of accounting quality and the cost of capital, we find that firms with high accounting quality and a low level of earnings management have averagely significant lower cost of capital than firms with low accounting quality and a high level of earnings management. Keywords: accounting quality; disclosure quality; earnings management; cost of capital. DOI: 10.1504/IJEA.2020.10027157