Abstract: Prior to Regulation Fair Disclosure some management spent considerable time and effort guiding analyst earnings estimates; other management did not. In this paper I examine the determinants and consequences of management's decision to work with analysts in the development of their earnings estimates using proprietary survey data from the National Investor Relations Institute. Findings suggest that when earnings are important to valuation but hard to forecast because businesses and financial transactions are complex, management is more likely to provide assistance to analysts presumably to avoid inaccurate analyst forecasts and negative earnings surprises. A comparison of guided and unguided analyst forecasts indicates that guided quarterly earnings forecasts are more accurate but also more frequently pessimistic, consistent with analysts rationally trading offbias for accuracy to retain access to management's earnings guidance. Cross-sample comparisons of analysts' stock recommendations and long-term growth forecasts provide additional support for the hypothesis that analyst objectivity and independence is affected by management's decision to provide earnings guidance. Finally, evidence from stock price reactions to deviations from the consensus forecast (the traditional measure of earnings surprises) indicates that investors distinguish between guided and unguided analyst forecasts when forming their earnings expectations. This study furthers our understanding of what factors affect management's disclosure choices and how managers' disclosure choices influence the objectivity and independence of sell-side analysts.

Prior to Regulation Fair Disclosure (Reg FD) some management spent considerable time and effort guiding analyst earnings estimates, often through detailed reviews of analysts' earnings models. In this paper I use proprietary survey data from the National Investor Relations Institute to identify firms that reviewed analysts' earnings models prior to Reg FD and those that did not. Under the maintained assumption that firms conducting reviews implicitly or explicitly guided analysts' earnings forecasts, I document firm characteristics associated with the decision to provide private managerial earnings guidance. Then, I document the characteristics of 'guided' versus 'unguided' analyst earnings forecasts. Findings demonstrate an association between several firm characteristics and guidance practices: managers are more likely to review analyst earnings models when the firm's stock is highly followed by analysts and largely held by institutions, when the firm's market-to-book ratio is high, and its earnings are important to valuation (high Industry-ERC R2), but hard to predict because its business is complex (high # of Segments). A comparison of guided and unguided quarterly forecasts indicates that guided analyst estimates are more accurate, but also more frequently pessimistic. An examination of analysts' annual earnings forecasts over the fiscal year does not distinguish between guidance and no guidance firms; both experience a quot;walk downquot; in annual estimates. To distinguishing between guidance and no guidance firms, one must examine quarterly earnings news: unguided analysts walk down their annual estimates when the majority of the quarterly earnings news is negative, guided analysts walk down their annual estimates even though the majority of the quarterly earnings news is positive.

We examine management forecasts to determine whether Regulation Fair Disclosure has improved the quality and quantity of public disclosures. Management forecasts are voluntary, provide earnings guidance and are highly sought by investors and analysts. We find that the information disclosed by managers has improved in terms of frequency, specificity and verifiable information provided. We also find that Regulation Fair Disclosure has reduced information asymmetry, and information leakage prior to the release of the MEF. We find no evidence of greater returns volatility. Our results suggest that generally Regulation Fair Disclosure has achieved one of its stated goals of providing a more level playing field to all investors.

We provide archival evidence on how a particular type of supplementary information affects the credibility of management earnings forecasts. Managers often provide detailed forecasts of specific income statement line items to shed light on how they plan to achieve their bottom-line earnings targets. We assess the effect of this forecast disaggregation on the credibility of management earnings forecasts. Based on a relatively large hand-collected sample of 900 management earnings forecasts, we find that disaggregation increases analysts' sensitivity to the news in managers' earnings guidance, suggesting that analysts find the guidance more credible. More importantly, we identify several factors that influence this relation. First, disaggregation plays a more important role when earnings are otherwise more difficult to forecast. Second, disaggregation is more important after Regulation Fair Disclosure prohibited selective disclosure, especially for firms that were more affected because they had previously provided more private guidance. Finally, in contrast to common assertions in the prior literature, we find that in more recent years, disaggregation matters more for guidance that conveys bad news. Managers as well as researchers should be interested in evidence suggesting that financial analysts find disaggregation especially helpful in contexts where managers' credibility is particularly important.

This study investigates market reactions to voluntary earnings guidance provided by managers after the enactment of Regulation FD, which requires companies to disseminate material news to all investors simultaneously. More managers now issue their guidance to the public instead of disclosure to a selective group of analysts, in conformity with Regulation FD. We examine a very large set of earnings guidance disclosures based on identification of these announcements using text mining techniques.Our results indicate that guidance provided with the disclosure of earnings is not associated with significant market reactions, but guidance provided between earnings releases is associated with significant negative reactions. We further show that market reactions are consistent with the trend implied by management even when it is in the form of qualitative disclosure. Finally, we show that market reactions are stronger (more negative, typically) for NASDAQ firms than NYSE or AMEX firms, larger firms, and when the disclosure involves revenues and not earnings.