Abstract
When managers face uncertain business environments or enter a compensation contract that ties their firm to other's behaviours, their management forecast disclosure may be affected by the behaviours of others. This study examines management earnings forecast revisions in Japan from the standpoint of herding behaviour theory. The results reveal the following: 1) management earnings forecast revisions follow the mean values of preceding forecast revisions issued by firms in the same industry; 2) mimicking behaviours are weaker when the number of days from the management earnings forecast release to the closing date decreases or when the mean value of rivals' forecast revisions is negative; 3) bold management earnings forecast revisions (i.e., that deviate significantly from the mean value of rivals' forecast revisions) lead to improved forecast accuracy. The results suggest that analysts, policymakers, and investors should consider herding behaviours when they use management forecasts to make predictions.
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