Macroeconomic Variables Fluctuations and Management Earnings Forecast Horizon

Document Type : Original Article

Authors

1 Assistant Professor in Faculty of Management & Accounting, Shahid Beheshti University, Tehran, Iran

2 Ph.D. in Accounting, Shahid Beheshti University, Tehran, Iran

3 Ph.D. Student in Allame Tabatabaei University, Tehran, Iran

Abstract

This paper assesses the impact of a comprehensive set of macroeconomic factors (including changes in Gross Domestic Production (GDP), changes in trade balance, changes in exchange rate, and changes in inflation rate) on management earnings forecast horizon in companies’ annual reports. The data set includes 85 companies listed on Tehran Stock Exchange (TSE) for the period of 1386 -1393. The study used Ordinary Least Squares (OLS) regression model to examine the relationship between above mentioned macroeconomic factors and management earnings forecast horizon. The empirical results show that among the macroeconomic variables that have been examined, there are only significant relationships between two of above mentioned macroeconomic factors (including changes in exchange rate, and changes in inflation) and management earnings forecast horizon. Therefore we infer that by increasing volatility of both exchange and inflation rates, managers prefer to choose short term horizon for making their earnings forecast. We did not find any statistically significant association between other macroeconomic factors (including changes in GDP and trade balance) and management earnings forecast. The results suggest that macroeconomic variables can affect time horizon (short-term and long-term) of management earning forecast.

Keywords

Accounting and Auditing Research
Volume 11, Issue 41
April 2019
Pages 21-36

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