When do analysts adjust for biases in management guidance? Effects of guidance track record and analysts' incentives

Prior research indicates that analysts do not fully adjust for the general downward bias in earnings guidance issued by management. We report the results of two experiments designed to investigate how guidance track record and analysts incentives jointly explain the extent to which analysts adjust for guidance bias. Our results suggest that analysts with accuracy incentives adjust for managements track record of downwardly biased guidance when the bias is relatively small (one cent), but those with relationship incentives do not. Furthermore, the difference in adjustment is larger when the bias track record is inconsistent than when it is consistent. Also, when guidance bias is larger (two cents) relative to smaller (one cent), analysts with relationship incentives partially adjust, as they appear to strike a balance between accuracy and their desire to please management. These findings hold implications for investors, regulators, and the interpretation of prior research

Friends with Benefits: Social Coupons as a Strategy to Enhance Customers’ Social Empowerment

Businesses often seek to leverage customers’ social networks to acquire new customers and stimulate word-of-mouth recommendations. While customers make brand recommendations for various reasons (e.g., incentives, reputation enhancement), they are also motivated by a desire for social empowerment—to feel an impact on others. In several multi-method studies, we show that facilitating sharing of social coupons (i.e., coupon sets that include one for self-use and one to be shared) is a unique marketing strategy that facilitates social empowerment. Firms benefit from social coupons because customers who share spend more and report greater purchase intentions than those who do not. Furthermore, we demonstrate that social coupons are most effective when the sharer’s brand relationship is new versus established. For customers with an established relationship, sharing with a receiver who also has an established relationship maximizes potential impact. Together, these studies connect social empowerment to relationship marketing and provide guidance to managers targeting social coupons