No reliance on guidance: counter-signaling in management forecasts

Cyrus Aghamolla, Carlos Corona, Ronghuo Zheng

Research output: Contribution to journalArticlepeer-review

8 Scopus citations


This study presents and provides an explanation for a novel stylized fact: both high-performing and troubled companies withhold issuing earnings guidance. We assume that the manager's ability affects the level of earnings and the accuracy of guidance, but issuing a forecast is costless for all manager types. Managers are thus able to signal their ability through accuracy in their forecasts. While high ability managers would seem to benefit the most from issuing guidance, in equilibrium we find that both high and low ability managers withhold issuing guidance, while intermediate types forecast. Hence, high ability managers counter-signal in equilibrium, which does not result in a subsequent “punishment” by the market.

Original languageEnglish (US)
Pages (from-to)207-245
Number of pages39
JournalRAND Journal of Economics
Issue number1
StatePublished - Mar 1 2021

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© 2021, The RAND Corporation.


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