The relation between a prior earnings forecast by management and analyst response to a current management forecast
Article Abstract:
A study was conducted to find out if the accuracy of a previous earnings forecast by management is used by analysts to determine the believability of a new management forecast. Data were drawn from a sample of 173 multiple forecasting firms, with a mean forecast interval of 22 months and a median of 15 months. Results demonstrated that prior forecasts by management affect analyst forecast revisions after a subsequent forecast by management. It appears that managements have achieved forecasting reputations among analysts. The relevance of this finding becomes clearer when one considers the present SEC position regarding management's willful forecasts of financial information. The commission merely requires that forecasts be made in good faith and on a reasonable basis.
Publication Name: Accounting Review
Subject: Business, general
ISSN: 0001-4826
Year: 1996
User Contributions:
Comment about this article or add new information about this topic:
Earnings predictability and bias in analysts' earnings forecasts
Article Abstract:
Financial analysts' forecasts of earnings are significantly more biased for firms characterized by low earnings predictability. Analysts' forecasting behavior was investigated by examining whether earnings predictability based on past information is a determinant of cross-sectional differences in forecast bias. This is based on the premise that analysts do not benefit from issuing biased forecasts if market players can establish relatively accurate expectations without analysts' forecasts. Evidence was found to support the hypothesis that analysts have greater incentives to issue more optimistic forecasts for firms that are difficult to predict with publicly available information, since optimism facilitates access to and acquisition of non-public information.
Publication Name: Accounting Review
Subject: Business, general
ISSN: 0001-4826
Year: 1998
User Contributions:
Comment about this article or add new information about this topic:
The impact of annual earnings announcements on convergence of beliefs
Article Abstract:
The relationship between annual earnings announcements and convergence of beliefs was examined. The study investigated the Bayesian model proposing that announcements of yearly earnings should cause analyst forecasts of future earnings to converge at a greater degree. I/B/E/S Detail data for the period Jan 1983-Jun 1990 were used for the research. Findings showed that announcements of earnings do lessen variance in analyst forecasts, which supports the Bayesian model. These results contradict the findings of Morse et al (1991) who, with the use of I/B/E/S Summary data, found earnings announcements to decrease convergence of beliefs.
Publication Name: Accounting Review
Subject: Business, general
ISSN: 0001-4826
Year: 1992
User Contributions:
Comment about this article or add new information about this topic:
- Abstracts: The effect of ex ante earnings uncertainty on earnings response coefficients. The incremental information in SFAS No. 33 income disclosures over historical cost income and its cash and accrual components
- Abstracts: Tax planning, earnings management, and the differential information content of bank earnings components