gender differential paper IJCRB

ijcrb.webs.com
JUNE 2011
INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS VOL 3, NO 2
of incomplete information in such types of forecasts (Weihong Xu 2009), and the user
influence of forecast accuracy (Carlo D. Smith, John T. Mentzer 2010).
H2: Firms issue bias and incomplete information.
Prior Literature on Forecasts show the management’s perspective towards what they believe
to be the future position of their firm, company or business. When issuing such forecasts
management perception plays its part and since they want what is better for their company
rather than depicting the true picture the issued information is bias which then increases the
information asymmetry already existing in the parties to the contract (Francis, Philbrick
1993; Das, Levine, Sivaramakrishnan 1998). Later research also proves the concept of
presence of biasness from Management or the issuing authority in such earnings forecasts
(Lim 2001; Matsumoto 2002; Richardson, Teoh, Wysocki 2004).
H3: Biasness increases information Asymmetry.
This concept was further explored by (Kato, Skinner, Kunimura 2009) where they argue that
the managers’ initial annual earnings forecasts (In the Year Start) are, on average, upward
biased (optimistic) depicting Management’s purpose to misguide the investor’s and generate
more funds than actual if the true forecasts were provided . Importance of such forecasts for
the firms and management is examined by (Lambert and Stock 1993) where they positioned
forecasting as the driving force behind all forward planning activities within the firm.
Research provides evidence that when such forecasts are accurate, they help companies and
supply chains to prepare for short and long term changes in market conditions and help
improve operating performance (Fildes and Beard 1992; Gardner 1990; Wacker and Lummus
2002). Whereas when forecasts accuracy degrades, decisions based on the forecasts may lead
to operational missteps.
H4: Forecasts affect Organizations positively and negatively.
Investor Decision is our dependent variable in this study. In previous literature by (Leonard
Karakowsky, A. R. Elangovan 2001; Collin Mason, Matthew Stark; 2004) explained concept
was the fact that investor decision and their investment choices are affected by the
information demands of investors or the information they are looking forwards in such
forecasts. They have also argued that information demands or the required information
differentiates from investor to investor and it also depends on the type of investment.
Investor decision besides the above mentioned factors is also affected by their relationship
with other investor’s (John Hendry, Paul Sanderson, Richard Barker, John Roberts 2006;
Elaine Henry 2008) there training (Kim Hoque, Nicolas Bacon; 2008) how the information is
provided to them (Elaine Henry 2008) and the peer affects while making an investment
decision (Lilian Ng, Fei Wu 2010). (Collin Mason, Matthew Stark 2004) define investor
decision as a mix of information regarding “Entrepreneur, Strategy of the business,
Operations of the firm, Product/Services in which they are dealing, Market Situation,
Financial Strength of the company, Investor Fit with the organization and various others”.
H5: Investors Decision is mix.
Disclosure Quality of these forecasts is our mediating variable in this study. Effect of
disclosure quality and information asymmetry on investor’s decision is discussed by
(Millicent Chang, Gino D’Anna, Iain Watson, and Marvin Wee 2008) where they argue that
investors are affected by the authority providing the information and the reliability of
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