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Management Forecasts and Investment Efficiency: Evidence from a Natural Experiment

Zhongwen Fan et al.

Accounting Horizons2026https://doi.org/10.2308/horizons-2024-171article
AJG 3ABDC A
Weight
0.50

Abstract

SYNOPSIS This study examines the effect of management forecasts on investment efficiency by exploiting a regulatory change that provides plausibly exogenous variation in the presence of forecast disclosure. A Canadian security issuer that produces minerals and metals had to provide forecasts in technical reports, but, in 2011, firms with gross revenues above certain thresholds were exempted from this requirement. We find that disclosure exemption increases the sensitivity of investment to Tobin’s q, indicating that the original forecast requirement impairs investment efficiency. Additional evidence suggests that this effect likely arises from forecast exemptions enhancing managerial learning from stock prices, mitigating short-termism, and reducing competitive pressure. Data Availability: All data used in this study are publicly available. JEL Classifications: G10; G30; M41.

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https://doi.org/https://doi.org/10.2308/horizons-2024-171

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@article{zhongwen2026,
  title        = {{Management Forecasts and Investment Efficiency: Evidence from a Natural Experiment}},
  author       = {Zhongwen Fan et al.},
  journal      = {Accounting Horizons},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.2308/horizons-2024-171},
}

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

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