Preannouncements: Forecast or Realized Earnings?
Keywords:
management forecast, preannouncements, enterprise resource planningAbstract
The literature has long recognized preannouncements as management forecasts issued after the fiscal period ends but before the actual earnings announcements. However, with the advent of Enterprise Resource Planning (ERP) systems, companies now can gather information promptly and process it efficiently, which allows companies to prepare earnings summaries in real-time, thus making it unnecessary to issue forecasts in the days following the quarter-end date. This study argues that any earnings announcements issued after the quarter-end date (preannouncements) by companies that have implemented ERP systems are based on realized earnings. Such announcements are expected to be more accurate than management forecasts, which are based on estimates of future earnings, and may be issued before the quarter-end date. This study finds that the accuracy of management voluntary disclosures and the timeliness of preannouncements improved in the periods following ERP implementation.
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