Corporate social responsibility awareness and management forecast bias

Megumi Suto, Hitoshi Takehara

Research output: Chapter in Book/Report/Conference proceedingChapter

Abstract

For investors, how to gain accurate and unbiased information about future earnings of an investee company is critical to demand a risk premium that is reflected in the expected rate of return. Management earnings forecasts are a major source of information about future earnings and are posited as especially important in the Japanese disclosure system. However, managers might face incentive bias toward opportunistic decisions on the forecast from a short-term view, as there is a conflict of interest between managers and investors about risk premium. The issue of how to mitigate such incentive bias is a key for disciplined pricing in the market by reducing information asymmetry. Management earnings forecasts definitely influence both the quality and quantity of information about future earnings. Responsible management forecasts are the core of the self-disciplining mechanism to provide more accurate and less biased information in the market.

Original languageEnglish
Title of host publicationAdvances in Japanese Business and Economics
PublisherSpringer
Pages155-177
Number of pages23
DOIs
Publication statusPublished - 2018

Publication series

NameAdvances in Japanese Business and Economics
Volume17
ISSN (Print)2197-8859
ISSN (Electronic)2197-8867

ASJC Scopus subject areas

  • Business and International Management
  • Strategy and Management
  • Economics and Econometrics
  • Finance

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  • Cite this

    Suto, M., & Takehara, H. (2018). Corporate social responsibility awareness and management forecast bias. In Advances in Japanese Business and Economics (pp. 155-177). (Advances in Japanese Business and Economics; Vol. 17). Springer. https://doi.org/10.1007/978-981-10-8986-2_7