The relation between a prior earnings forecast by management and analyst response to a current management forecast

This paper investigates whether the accuracy of a prior earnings forecast by management serves as an indicator to analysts of the believability of a current management forecast. Regression analysis is used to examine the relationship between the usefulness of a prior forecast by management and analyst response to a current forecast, after controlling for other determinants of believability. The results suggest that management establishes a forecasting ''reputation'' based on prior earnings forecasts.