Abstract
This study examines the inferential bias due to the failure to control for self-selection when studying the market's reaction to management earnings forecasts. The analysis is conducted by controlling for self-selection and comparing the results to those obtained when self-selection is not controlled. This comparison suggests that the overall inference of a market reaction to the management forecast issuance does not change. However, the statistical significance declines when self-selection is considered. Since the issuance of a management forecast is an obvious self-selection, the results of this study suggest that self-selection should be considered and evaluated in quasi-experimental studies in accounting and finance.
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Yeo, G.H.H., Ziebart, D.A. The effect of self-selection bias on the testing of a stock price reaction to management's earnings forecasts. Rev Quant Finan Acc 5, 5–25 (1995). https://doi.org/10.1007/BF01074849
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DOI: https://doi.org/10.1007/BF01074849