Resumen
Analyst earnings forecasts are an important input to the Residual Income Valuation model; however, these forecasts are subject to management guidance. This study examines the impact of forecast guidance on the usefulness of analyst earnings forecasts in firm valuation. It finds that valuation models estimated using guided forecasts have less ability to explain stock price (P) and predict future returns through V/P ratios than valuation models estimated using non-guided forecasts. These results provide evidence that forecast guidance reduces the usefulness of analyst forecasts in firm valuation and impairs the performance of forecast-based valuation models to predict firm value.