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The effectively mandatory provision of management forecasts of earnings is a unique feature of Japan's financial disclosure system. The first objective of this study is to identify the determinants of systematic bias in management forecasts using a sample of more than 36?000 one-year-ahead earnings forecasts announced by Japanese firms at the beginning of a fiscal year over the period 1979 to 2005. The examination of ex post management forecast errors shows that financial distress, firm growth, firm size and prior forecast errors are all associated with bias in management forecasts. The second objective of this study is to investigate whether analysts are aware of these factors that are found to be related to systematic bias in management earnings forecasts. The examination of analysts� forecasts issued subsequent to the announcement of management forecasts reveals that analysts take account of these factors when they issue their own earnings forecasts. The overall findings suggest that analysts are to some extent aware of the determinants of systematic bias in management forecasts.
