Review of Accounting Studies

, Volume 12, Issue 2–3, pp 217–225

Discussion of “biases in multi-year management financial forecasts: Evidence from private venture-backed U.S. companies”


DOI: 10.1007/s11142-007-9027-2

Cite this article as:
Demers, E.A. Rev Acc Stud (2007) 12: 217. doi:10.1007/s11142-007-9027-2


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.

JEL Classifications

G24 M13 M41 


Management forecasts Forecasting bias Venture capital Start-ups 

Copyright information

© Springer Science+Business Media, LLC 2007

Authors and Affiliations

  1. 1.INSEADFontainebleau CedexFrance

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