Stock Return or Sales Growth? Multiple Performance Feedback and Strategic Investments Under Securities Analysts' Earnings Pressure

Yu Zhang (First Author), Yan Gong (Participant Author)

Research output: Contribution to journalJournal

12 Citations (Web of Science)

Abstract

Pressure to meet or beat earnings forecasts from securities analysts leads managers of publicly traded firms to improve short-term earnings by cutting strategic investments at the expense of long-term competitiveness. Drawing on the behavioral theory of the firm, we explore how different dimensions of performance feedback moderate managerial responses to this pressure. We find that the negative impact of earnings pressure on a firm's strategic investments is strengthened when it receives performance feedback from lower stock returns but is weakened when the firm receives performance feedback from lower sales growth. When both dimensions of performance feedback are present, we find that sales growth has a stronger moderating effect. Our paper contributes to the developing literature on multiple dimensions of performance feedback by demonstrating how stock price and sales growth differentially influence managerial responses to earnings pressure. From a management standpoint, we highlight the possibility that performance feedback influences managerial responses to earnings pressures in ways that managers may not fully consider.
Original languageEnglish
Pages (from-to)1356-1385
JournalJournal of Management Studies
Volume55
Issue number8
DOIs
Publication statusPublished - 2018

Corresponding author email

yu.zhang@ceibs.edu

Keywords

  • earnings pressure
  • multiple performance feedback
  • securities analysts
  • strategic investments

Indexed by

  • FT
  • ABDC-A*
  • Scopus
  • SSCI

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