Management Sales Forecasts and Firm Market Power

We investigate whether a firm's market power within its product market affects management sales forecast behavior. Our examination of the relation between market power and management sales forecasts is motivated by the notion that sales forecasts differ from other types of forecasts because sales forecasts provide investors and competitors with a more transparent signal of a firm's short-term demand expectations and its immediate actions in the product market than other forecasts. Thus, we first provide evidence consistent with sales forecasts containing unique information about future sales and evidence consistent with this information being related to competitor pricing and output decisions. We then find evidence that higher market power, proxied by excess margin, is associated with a higher likelihood of issuing sales forecasts after controlling for industry-level competition effects and earnings forecast behavior. Overall, our findings are consistent with higher-market-power firms being more willing to publicly disclose sales forecast information