Discussion of “biases in multi-year management financial forecasts: Evidence from private venture-backed U.S. companies”
- Elizabeth Anne Demers
- … show all 1 hide
Rent the article at a discountRent now
* Final gross prices may vary according to local VAT.Get Access
Armstrong, Dávila, Foster, and Hand (“ADFH”) use a proprietary venture capital database of revenue and profit projections submitted by young firms seeking financing to attempt to address a number of questions related to forecasts by managers of early stage, venture-backed, private entrepreneurial firms. The proprietary dataset together with the creative use of a “historically-grounded conditional projections” methodology are the most interesting features of ADFH’s study. However, these same aspects give rise to empirical design constraints that the study does not fully overcome. In addition, there are numerous leaps of logic required to arrive at some of ADFH’s conclusions and there are alternative explanations for ADFH’s findings that have not been entirely refuted. This leaves the reader with some doubt as to whether all of ADFH’s conclusions are fully substantiated. Nevertheless, the evidence presented makes an interesting contribution to our understanding of the forecasting behavior of young, private, rapidly growing, VCbacked firms, and provides some natural economic and methodological leads into further studies of these issues.
- Blinder, A. S. (1973). Wage discrimination: Reduced form and structural variables. Journal of Human Resources, 8, 436–455. CrossRef
- Bruce, B. R., & Bradshaw, M. T. (2004). Analysts, Lies, and Statistics: Cutting Through the Hype in Corporate Earnings Announcements. New York: Institutional Investor Books.
- Campbell, J. Y., Lettau, M., Malkiel, B., & Xu, Y. (2001). Have individual stocks become more volatile? An empirical exploration of idiosyncratic risk. Journal of Finance, 56, 1–43. CrossRef
- Faul, J. L., Demers, E. A., Burke, C. M., & Poulter, L. W. (1999) The reproducibility of repeat measures of airway inflammation in stable atopic asthma. American Journal of Respiratory and Critical Care Medicine, 160, 1457–1461.
- Joos, P., & Zhdanov, A. (2006). Earnings and Equity Valuation in the Biotech Industry: Theory and Evidence. Tilburg University.
- Oaxaca, R. (1973). Male–female wage differentials in urban labor markets. International Economic Review, 14, 693–709. CrossRef
- Shiller, R. J. (2000) Irrational Exuberance. Princeton, New Jersey: Princeton University Press.
- Discussion of “biases in multi-year management financial forecasts: Evidence from private venture-backed U.S. companies”
Review of Accounting Studies
Volume 12, Issue 2-3 , pp 217-225
- Cover Date
- Print ISSN
- Online ISSN
- Kluwer Academic Publishers-Plenum Publishers
- Additional Links
- Management forecasts
- Forecasting bias
- Venture capital
- Industry Sectors
- Author Affiliations
- 1. INSEAD, Boulevard de Constance, Fontainebleau Cedex, 77305, France