Research on performance forecasting bias in start-up companies

Abstract

If a company’s corporate performance forecasting bias is not zero and it continues to over- or under-predict actual performance, capital investments and employment will deviate from their expected levels. Therefore, forecast bias is a very important issue for a company’s management. However, few empirical studies exist on corporate performance forecasting bias in start-up companies, given the data limitations. Most existing studies have primarily analysed listed companies, and few studies particularly targeted small, medium and micro or start-up companies. Therefore, this study uses data from start-up companies that received loans from the Japan Finance Corporation (JFC) to investigate how new start-up companies’ performance forecasting bias is affected by their attributes and past performance forecasts. The results of the analysis showed that company size, profitability and optimism of past performance forecasts had a positive impact on performance forecasting bias. The results of this research contribute to the elaboration of corporate performance forecasts and are expected to be useful for corporate management when formulating management strategies and engaging in resource allocation, stakeholder decision making and policymaking.

Keywords:

• start-up
• performance forecasting
• bias
• SMEs
• Japanese companies

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

The author received no direct funding for this research.

Notes on contributors

Yukiko Konno

Yukiko Konno is an associate professor at Faculty of Economics, Kokugakuin University. Her research interests include financial management and quantitative analysis of company activities.