Corporate Managers’ Perspectives on Forward-Looking Guidance: Survey Evidence

To provide insights into the guidance practices of publicly traded companies, we survey 357 corporate managers and conduct nine in-depth interviews, including managers of both guiding and non-guiding firms. The most commonly cited reasons that managers guide are to satisfy analyst and investor demands for guidance and to manage their expectations. Managers of firms that guide say they are relatively unconcerned about possible proprietary or litigation costs of guidance; on the other hand, managers of roughly half of the non-guider firms indicate that litigation risk is a substantial concern. Most managers report that their firms issue conservative guidance, with 60% of managers saying their private expectation lies above the midpoint of their public guidance range, and less than 7% saying it lies below this midpoint. We also find that managers are miscalibrated: on average, they indicate a 78% likelihood they will report results within their guidance range, even though historical estimates for these firms suggest this occurs only 31% of the time. Managers say they are unconcerned about guidance inducing short-termism in corporate decision-making, despite their belief that increased analyst and investor short-termism is a primary consequence of providing guidance. Finally, nearly half of our guiders continued to guide - either affirming or revising existing guidance - through the onset of the COVID-19 pandemic, and 71% of guiders have maintained their guidance policies in the time since.