Are long-term earnings targets forecasts?
Name
1051300088-MIT.pdf
Description
Full printable version
Size
3.29 MB
Format
Adobe PDF
Checksum (MD5)
0d06af798f609796af48c2fd4597cdf8
Author(s)
Packard, Heidi A
Advisor(s)
John E. Core.
Date Issued
2018
Publisher
Massachusetts Institute of Technology
Abstract
This paper examines whether earnings targets used in long-term performance-based compensation plans predict future performance. Using a sample of targets from long-term grants made to CEOs from 2007 to 2012, I find that earnings targets provide information about future earnings outcomes; however, analysts do not respond to the information targets provide at the time of disclosure. Rather, I find analysts primarily adjust their expectations in the year of the performance period. The information value of targets is robust to variation in crosssectional factors such as monitoring and financial reporting concerns, and concentrated in cases where agency conflicts are low and traditional management forecasts are not available. To my knowledge, this analysis is the first to document a forecasting role for the long-term targets used in earnings-based compensation plans.
Description
Thesis: Ph. D., Massachusetts Institute of Technology, Sloan School of Management, 2018.
Cataloged from PDF version of thesis.
Includes bibliographical references (pages 37-39).
Subjects
Sloan School of Management.
MIT Department
Sloan School of Management
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