The Role of Managers' Expectations Stickiness in Changing the Information Content of Current Earnings

The tendency to underreact to incoming news and information may reflect a behavioral bias among managers in response to new economic conditions. As a result, managers exhibit expectation stickiness, limiting their adjustments to prior forecasts. This article aims to investigate the role of managers’ expectation stickiness in altering the information content of current earnings. To this end, data from 120 companies listed on the Tehran Stock Exchange, spanning the period from 2011 to 2022, were collected and analyzed using a pooled data regression model to test the research hypotheses. Managers’ expectation stickiness was measured using earnings forecasting approach. The findings reveal that expectation stickiness is evident among managers in the studied companies. Furthermore, this stickiness contributes to an increase in earnings anomalies. Finally, the results of the third hypothesis demonstrate a significant relationship between managers’ expectation stickiness and the information content of current earnings. Specifically, expectation stickiness reduces managers’ inclination to revise forecasts and respond appropriately to new information. This delay and underreaction, driven by adherence to prior expectations, diminish the reliability of current earnings and weaken their information content for predicting future performance