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Earnings Guidance

Definition

A practice in which corporations issue quarterly disclosures to both securities analysts and the public about the level of earnings that the company expects to report in the near future. Critics have asserted that doing away with quarterly earnings guidance will help companies focus on long-term rather than short-term results, a practice that should ultimately increase shareholder value. Another argument against issuing earnings guidance is that it often encourages undesirable executive behavior (e.g., artificially boosting earnings), in an effort to meet guidance targets, which sometimes leads to claims against corporate directors and officers. In March 2007, the U.S. Chamber of Commerce recommended that businesses discontinue the practice of issuing quarterly earnings guidance.

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