"The Information Content of Management Earnings Forcasts: An Analysis of Hard versus Soft Data"

We examine the announcement effects of hard (quantitative) and soft (qualitative)information contained in management earnings forecasts. Consistent with previous studies, we confirm a positive relation between the earnings surprise component of the announcement and the magnitude of the abnormal return. In contrast with previous studies, we examine the impact of soft information on abnormal returns while controlling for the impact of hard information. We use textual analysis to identify and measure the level of two specific soft information variables(Optimism and Certainty) present in each earnings forecast. Our empirical results show that soft information plays a significant role in explaining the magnitude of abnormal returns. In fact, soft information generally explains more of the announcement effect of earnings forecasts than hard information. Overall, our findings contribute to the growing literature that examines the economic significance of qualitative information.