Do managers use analysts’ information when constructing earnings guidance?

Prior literature focuses predominantly on the information flow between managers and analysts moving in one direction: from firms to analysts. I investigate whether information also flows in the opposite direction, and specifically, whether managers use analysts’ information when issuing earnings guidance. I find that management forecasts converge more to individual analyst forecasts when an analyst has been more accurate in the past four quarters. This relation is stronger when the past analyst forecast date is closer to the date of the current management forecast and is weaker when managers have incentives to bias their forecasts. In addition, managers use analysts’ information more when analysts have more access to macroeconomic resources, conditional on a firm being sensitive to macroeconomic trends. Managers also embed analysts’ information more when facing larger macroeconomic shocks, conditional on a firm being sensitive to macroeconomic trends. Finally, managers benefit from using analysts’ information by achieving higher forecast accuracy. My results highlight the information flow from individual analysts to managers.