DCC Séminaire de recherche - Prof. Gabriel Pundrich Pereira, Bocconi University, Italy
Mandatory management forecasts and lender expectations management
Monday 7 October 2019 (17h15 - 19h00) - Anthropole - 3032
Abstract: The objective of this study is to broaden the existing literature on management forecasts by examining how managers respond in terms of forecast characteristics once they are subject to debt monitoring after project finance (PF) approval. Examining a large sample of mandatory management forecasts of quarterly expenditure disclosed by early stage mining companies, we find PF approval results in managers increasing overestimates of cash outflows or creating ‘budget slack’. This is consistent with forecasts serving to manage expectations of lenders, signalling lower risk of cost-overruns during the mine development and construction phase.