Research seminar by Prof. Hari Ramasubramanian

Posted on January 13, 2025 by administrator

IIM K hosted its First research seminar on May 17, 2024, for the year 2024-25. It was conducted by Prof. Hari Ramasubramanian, Professor of managerial accounting at the Frankfurt School of Finance and Management, Germany.

The topic was Don t Get to the Point. Overprecision in Management Capital Expenditure Forecasts

Abstract of the talk given below

Motivated by precision bias theory, which suggests that the value of information decreases as it becomes overly precise, we examine whether capital expenditure forecast precision is associated with forecast accuracy, forecast revision rate, and future operating performance. We find that firms issuing point format forecasts issue less accurate forecasts, but that forecast precision is positively associated with accuracy among firms issuing range format forecasts. Similarly, forecast revision rate is increasing in forecast precision for range issuers, but is significantly lower for point issuers. Finally, we find that firms issuing range format forecasts have superior future operating performance compared to firms issuing point estimates. Our findings support the consensus view that increasingly precise information is associated with positive outcomes, but only within the sample of range forecast issuers. We argue that point estimates are likely an outcome of overprecision, hindering managerial learning and impeding forecast accuracy and future performance.