Abstract
We investigate the information content of management sales forecasts by developing an incremental accruals measure. We examine whether market efficiently prices this incremental accrual component. We further relate the incremental accrual measure with management earnings forecast errors testing its effect on manager’s forecast accuracy. Our findings indicate sales forecasts to contain valuable information. We find a significant association between our incremental accruals measure and future stock returns, implying that market participants can benefit by utilizing information released through sales forecasts. Finally, we find a significant negative association between the incremental accrual component and management forecast errors, above historical accruals.
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