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It has been widely documented that investors and analysts underreact to information in past earnings changes, a fundamental performance indicator. The purpose of this paper is to examine whether managers’ voluntary disclosure efficiently incorporates information in past earnings changes, whether analysts recognize and fully anticipate the potential inefficiency in management forecasts and whether managers’ potential forecasting inefficiency entirely results from intentional disclosure strategies or at least partly reflects managers’ unintentional information processing biases.

Archival data were used to empirically test the relation between management earnings forecast errors and past earnings changes.

Results show that managers underreact to past earnings changes when projecting future earnings and analysts recognize, but fail to fully anticipate, the predictable bias associated with past earnings changes in management forecasts. Moreover, analysts appear to underreact more to past earnings changes when management forecasts exhibit greater underestimation of earnings change persistence. Further analyses suggest that the underestimation of earnings change persistence is at least partly attributable to managers’ unintentional information processing bias.

This study contributes to the voluntary disclosure literature by demonstrating the limitation in the informational value of management forecasts. The findings indicate that the effectiveness of voluntary disclosure in mitigating market mispricing is inherently limited by the inefficiency in management forecasts. This study can help market participants to better use management forecasts to form more accurate earnings expectations. Moreover, our evidence suggests a managerial information processing bias with respect to past earnings changes, which may affect managers' operational, investment or financing decisions.

This paper aims to examine whether corporate social responsibility (CSR) is related to management sales forecast accuracy.

Use KLD measures of corporate responsibility combined with forecast accuracy regression model, including controls for management skills and expertise.

Socially responsible firms commit forecast errors of lower magnitude and sales forecast accuracy is positively related to the level of CSR.

A strong motive for research on the field of CSR topic under the scope of reporting quality. Future research could focus on alternative measures of CSR; such as announcements included into the financial statements or separately disclosed expenses. Examine the magnitude of confirmed relation, among different economies worldwide.

CSR effect on manager sales forecasting activity, highlight the impact of brand awareness and customer loyalty, as created by implementing CSR strategies, on firm growth and sales expansion.

The research enhances the era towards more socially responsible firms, presenting evidence of such an adoption on corporate fundamentals.

To the knowledge there is no prior research examining the implications of CSR on sales forecast accuracy.