The Dramaturgy of Earnings Guidance: An Institutional Analysis of a Soft Landing

• In Event: Potpourri (Accounting Behavior and Organizations and Tax)

Abstract

This paper applies institutional theory to the phenomenon of earnings guidance, a voluntary corporate disclosure where executives share financial projections with Wall Street security analysts. We interview executives at 31 publicly traded U.S. firms to study actions and structures used to reduce unwanted stock price volatility. This qualitative paper differs from traditional capital markets studies that evaluate quantitative relationships between projected accounting balances and subsequent stock market prices. We find evidence of an institutional environment where both corporate executives and security analysts play roles in efforts to reduce investor uncertainty and provide legitimacy to all stock market participants.

Authors

• Thomas Alfred King, Case Western Reserve University

• Timothy J Fogarty, Case Western Reserve University