Title page for ETD etd-09222006-152718


Type of Document Dissertation
Author Fleming, Damon M
URN etd-09222006-152718
Title The Effects of Management's Forecast Strategy on Venture Capitalist Investment Screening Judgment
Degree PhD
Department Accounting and Information Systems
Advisory Committee
Advisor Name Title
Cloyd, C. Bryan Committee Chair
Axsom, Daniel K. Committee Member
Bhattacharjee, Sudip Committee Member
Jenkins, James Gregory Committee Member
Yardley, James A. Committee Member
Keywords
  • management forecasts
  • venture capital
  • investment screening
  • management uncertainty
  • management credibility
  • strategic disclosure
Date of Defense 2006-09-22
Availability unrestricted
Abstract
Prior research indicates that management forecast strategies affect investors' perceptions of management, which, in turn, influence investors' judgments about the firm. The current study hypothesizes and demonstrates that decisions about the completeness and form of management's forecast disclosure affect venture capitalists' (VCs) investment screening judgments. In an experiment, 53 experienced VCs indicate whether they would recommend conducting due diligence on a new venture. I manipulate the completeness (inclusion vs. omission of quantitative data about the components of earnings) and form (point vs. range forecast values) of management's financial forecasts in a 2 X 2 between-subjects design. When management is more (less) complete in its forecast disclosure, participants make more (less) favorable investment screening judgments. Additionally, when managers provide less complete disclosures, the use of point rather than range forecasts leads to particularly unfavorable screening judgments, whereas when managers provide more complete disclosures, the use of point rather than range forecasts leads to particularly favorable screening judgments. Taken together, these results indicate that the completeness of forecast disclosure increases the favorability of screening judgments and decisions about the form of financial forecasts can offset some of the adverse consequences of less complete disclosure.
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