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Analyst Forecasts (analyst + forecast)
Terms modified by Analyst Forecasts Selected AbstractsIPO Underpricing, Firm Quality, and Analyst ForecastsFINANCIAL MANAGEMENT, Issue 2 2007Steven X. Zheng We find that IPO underpricing is positively related to post-IPO growth in sales and EBITDA, but is not significantly related to growth in earnings. Our evidence suggests that accrual reversals or earnings management may cause this inconsistency. We interpret the growth rates of sales and EBITDA as measures of firm quality, and conclude that our evidence supports the notion that IPO firms with greater underpricing are of better quality. Our tests on analysts' earnings forecast errors show that analysts are less positively biased in their earnings forecasts for IPO firms that have greater underpricing. [source] Analyst forecasts and price discovery in futures markets: The case of natural gas storageTHE JOURNAL OF FUTURES MARKETS, Issue 5 2009Gerald D. Gay We investigate analyst forecasts in a unique setting, the natural gas storage market, and study the contribution of analysts in facilitating price discovery in futures markets. Using a high-frequency database of analyst storage forecasts, we show that the market appears to condition expectations regarding a weekly storage release on the analyst forecasts and beyond that of various statistical-based models. Further, we find that the market looks through the reported consensus analyst forecast and places differential emphasis on the individual forecasts of analysts according to their prior accuracy. Also, the market appears to place greater emphasis on analysts' long-term accuracy than on their recent accuracy. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 29:451,477, 2009 [source] Accounting Policy Disclosures and Analysts' ForecastsCONTEMPORARY ACCOUNTING RESEARCH, Issue 2 2003Ole-Kristian Hope Abstract Using an international sample, I investigate whether the extent of firms' disclosure of their accounting policies in the annual report is associated with properties of analysts' earnings forecasts. Controlling for firm- and country-level variables, I find that the level of accounting policy disclosure is significantly negatively related to forecast dispersion and forecast error. In particular, I find that accounting policy disclosures are incrementally useful to analysts over and above all other annual report disclosures. These findings suggest that accounting policy disclosures reduce uncertainty about forecasted earnings. I find univariate but not multivariate support for the hypothesis that accounting policy disclosures are especially helpful to analysts in environments where firms can choose among a larger set of accounting methods. [source] High-Technology Intangibles and Analysts' ForecastsJOURNAL OF ACCOUNTING RESEARCH, Issue 2 2002Orie E. Barron This study examines the association between firms' intangible assets and properties of the information contained in analysts' earnings forecasts. We hypothesize that analysts will supplement firms' financial information by placing greater relative emphasis on their own private (or idiosyncratic) information when deriving their earnings forecasts for firms with significant intangible assets. Our evidence is consistent with this hypothesis. We find that the consensus in analysts' forecasts, measured as the correlation in analysts' forecast errors, is negatively associated with a firm's level of intangible assets. This result is robust to controlling for analyst uncertainty about a firm's future earnings, which we also find to be higher for firms with high levels of internally generated (and expensed) intangibles. Given that analyst uncertainty increases and analyst consensus decreases with the level of a firm's intangible assets, we also expect and find that the degree to which the mean forecast aggregates private information and is more accurate than an individual analyst's forecast increases with a firm's intangible assets. Finally, additional analysis reveals that lower levels of analyst consensus are associated with high-technology manufacturing companies, and that this association is explained by the relatively high R&D expenditures made by these firms. Overall, our results are consistent with financial analysts augmenting the financial reporting systems of firms with higher levels of intangible assets (in terms of contributing to more accurate earnings expectations), particularly R&D-driven high-tech manufacturers. [source] Discussion of High-Technology Intangibles and Analysts' ForecastsJOURNAL OF ACCOUNTING RESEARCH, Issue 2 2002Elizabeth Demers First page of article [source] Analysts' Forecasts in Asian-Pacific Markets: The Relationship among Macroeconomic Factors, Accounting Systems, Bias and AccuracyJOURNAL OF INTERNATIONAL FINANCIAL MANAGEMENT & ACCOUNTING, Issue 3 2006Ervin L. Black In this study, we describe determinants of accuracy/bias of analysts' forecasts in 13 economies of the Asian-Pacific region. Examination of the accuracy of analysts' earnings forecasts allows us to judge how accounting systems and macroeconomic distinctions in this region affect earnings predictability. As many investors rely on analysts' earnings forecasts instead of producing their own, the growth of international investment means forecasts in non-US markets will become increasingly important to investors worldwide. Using a sample of firms with data available on Global Vantage and I/B/E/S International, we find that the analysts on average have a pessimistic bias in Asian-Pacific markets. We examine whether macroeconomic factors explain part of the difference in the size of analyst forecast errors, using the global competitiveness rankings of the World Economic Forum (WEF). We expect that those nations which are more open to foreign trade and investment and are ranked more highly by the WEF in its Global Competitiveness Index will also have more accurate analyst forecasts, as increased global competitiveness demands greater integration into the world economy, and such integration should lead to more transparent financial statements and more accurate earnings forecasts. Our findings are consistent with this prediction. We also find that countries with low book-tax conformity have more accurate earnings forecasts. [source] The Extreme Future Stock Returns Following I/B/E/S Earnings SurprisesJOURNAL OF ACCOUNTING RESEARCH, Issue 5 2006JEFFREY T. DOYLE ABSTRACT We investigate the stock returns subsequent to quarterly earnings surprises, where the benchmark for an earnings surprise is the consensus analyst forecast. By defining the surprise relative to an analyst forecast rather than a time-series model of expected earnings, we document returns subsequent to earnings announcements that are much larger, persist for much longer, and are more heavily concentrated in the long portion of the hedge portfolio than shown in previous studies. We show that our results hold after controlling for risk and previously documented anomalies, and are positive for every quarter between 1988 and 2000. Finally, we explore the financial results and information environment of firms with extreme earnings surprises and find that they tend to be "neglected" stocks with relatively high book-to-market ratios, low analyst coverage, and high analyst forecast dispersion. In the three subsequent years, firms with extreme positive earnings surprises tend to have persistent earnings surprises in the same direction, strong growth in cash flows and earnings, and large increases in analyst coverage, relative to firms with extreme negative earnings surprises. We also show that the returns to the earnings surprise strategy are highest in the quartile of firms where transaction costs are highest and institutional investor interest is lowest, consistent with the idea that market inefficiencies are more prevalent when frictions make it difficult for large, sophisticated investors to exploit the inefficiencies. [source] A Temporal Analysis of Earnings Surprises: Profits versus LossesJOURNAL OF ACCOUNTING RESEARCH, Issue 2 2001Lawrence D. Brown I show that median earnings surprise has shifted rightward from small negative (miss analyst estimates by a small amount) to zero (meet analyst estimates exactly) to small positive (beat analyst estimates by a small amount) during the 16 years, 1984 to 1999. I show that a rightward temporal shift in median surprise from negative to positive describes earnings, but neither profits nor losses. Median profit surprise shifts within the positive quadrant, from zero to one cent per share. Median loss surprise shifts within the negative quadrant from extreme negative (about -33 cents per share) to zero. I show that the median surprise for profits exceeds that for losses in every year. I document significant positive temporal trends in both meet and beat analyst estimates for both profits and losses, but I find a greater frequency of profits that either meet or beat analyst estimates in every year. I find a significant positive temporal trend in positive profits that are "a little bit of good news," and a significant negative temporal trend in managers who report losses that are an "extreme amount of bad news." My results are robust to the four internal validity threats I consider,namely temporal changes in: (1) analyst forecast accuracy, (2) the mix of earnings of one sign preceded by earnings of another sign four quarters ago, (3) the timeliness of the most recent analyst forecast, and (4) the I/B/E/S definition of actual earnings. I find that managers of growth firms are relatively more likely than managers of value firms to report good news profits. I show that when they do report positive profit surprises, managers of growth firms are more likely to report "a little bit of good news" in every year. [source] Analyst forecasts and price discovery in futures markets: The case of natural gas storageTHE JOURNAL OF FUTURES MARKETS, Issue 5 2009Gerald D. Gay We investigate analyst forecasts in a unique setting, the natural gas storage market, and study the contribution of analysts in facilitating price discovery in futures markets. Using a high-frequency database of analyst storage forecasts, we show that the market appears to condition expectations regarding a weekly storage release on the analyst forecasts and beyond that of various statistical-based models. Further, we find that the market looks through the reported consensus analyst forecast and places differential emphasis on the individual forecasts of analysts according to their prior accuracy. Also, the market appears to place greater emphasis on analysts' long-term accuracy than on their recent accuracy. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 29:451,477, 2009 [source] Earnings Management to Avoid Losses and Earnings Decreases: Are Analysts Fooled?,CONTEMPORARY ACCOUNTING RESEARCH, Issue 2 2003David C. Burgstahler Abstract This paper explores whether analyst forecasts impound the earnings management to avoid losses and small earnings decreases documented in Burgstahler and Dichev 1997, whether analysts are able to identify which specific firms engage in such earnings management, and the implications for significant forecast error anomalies at zero earnings and zero forecast earnings. We use data from Zacks Investment Research 1999 and find that analysts anticipate earnings management to avoid small losses and small earnings decreases. Further, analysts are much more likely to forecast zero earnings than firms are to realize zero earnings, and analysts are unable to consistently identify the specific firms that engage in earnings management to avoid small losses. This latter inability contributes to significant forecast pessimism associated with zero reported earnings and significant forecast optimism associated with zero earnings forecasts. [source] Rational Pricing of Internet Companies RevisitedFINANCIAL REVIEW, Issue 4 2001Eduardo S. Schwartz G12 Abstract In this article we expand and improve the Internet company valuation model of Schwartz and Moon (2000) in numerous ways. By using techniques from real options theory and modern capital budgeting, the earlier paper demonstrated that uncertainty about key variables plays a major role in the valuation of high growth Internet companies. Presently, we make the model more realistic by providing for stochastic costs and future financing, and also by including capital expenditures and depreciation in the analysis. Perhaps more importantly, we offer insights into the practical implementation the model. An important challenge to implementing the original model was estimating the various parameters of the model. Here, we improve the procedure by setting the speed of adjustment parameters equal to one another, by tying the implied half-life of the revenue growth process to analyst forecasts, and by inferring the risk-adjustment parameter from the observed beta of the company's stock price. We illustrate these extensions in a valuation of the company eBay. [source] Does corporate governance transparency affect the accuracy of analyst forecasts?ACCOUNTING & FINANCE, Issue 5 2006Gauri Bhat M4; O1 Abstract Using country-level proxies for corporate governance transparency, this paper investigates how differences in transparency across 21 countries affect the average forecast accuracy of analysts for the country's firms. The association between financial transparency and analyst forecast accuracy has been well documented in previous published literature; however, the association between governance transparency and analyst forecast accuracy remains unexplored. Using the two distinct country-level factors isolated by Bushman et al. (2004), governance transparency and financial transparency, we investigate whether corporate governance information impacts on the accuracy of earnings forecasts over and above financial information. We document that governance transparency is positively associated with analyst forecast accuracy after controlling for financial transparency and other variables. Furthermore, our results suggest that governance-related disclosure plays a bigger role in improving the information environment when financial disclosures are less transparent. Our empirical evidence also suggests that the significance of governance transparency on analyst forecast accuracy is higher when legal enforcement is weak. [source] Earnings Surprise "Materiality" as Measured by Stock ReturnsJOURNAL OF ACCOUNTING RESEARCH, Issue 5 2002William Kinney Ranked earnings surprise portfolios formed from First Call files for 1992,97 are used to assess the annual earnings surprise magnitude for an individual firm sufficient to expect a "significant market reaction." We find that, for an individual firm, the maximum probability of a gain from trading on prior knowledge of any surprise magnitude is .622. The lack of probable trading gains is due to the S,shaped surprise/return relation and the large variance of returns for a given magnitude of surprise. In turn, we find that the S,shape is related empirically to the dispersion of analyst forecasts. Thus, factors underlying dispersion differences are related to the importance or "materiality" of earnings surprise as measured by stock returns and explain at least part of the S,shaped surprise/return relation. [source] JUST SAY NO TO WALL STREET: PUTTING A STOP TO THE EARNINGS GAMEJOURNAL OF APPLIED CORPORATE FINANCE, Issue 4 2002Joseph Fuller CEOs are in a bind with Wall Street. Managers up and down the hierarchy work hard at putting together plans and budgets for the next year only to discover that the bottom line falls far short of Wall Street's expectations. CEOs and CFOs are therefore left in a difficult situation; they can stretch to try to meet Wall Street's projections or prepare to suffer the consequences if they fail. All too often, top managers react by suggesting or even mandating that middle- and lower-level managers redo their forecasts and budgets to get them in line with external expectations. In some cases, managers simply acquiesce to increasingly unrealistic analyst forecasts and adopt them as the basis for setting organizational goals and developing internal budgets. But either approach sets up the firm and its managers for failure if external expectations are impossible to meet. Using the recent experiences of Enron and Nortel, the authors illustrate the dangers of conforming to market pressures for unrealistic growth targets. They emphasize that an overvalued stock, by encouraging overpriced acquisitions and other value-destroying forms of overinvestment, can be as damaging to the long-run health of a company as an undervalued stock. Ending the "expectations game" requires that CEOs reclaim the initiative in setting expectations and forecasts so that stocks can trade at close to their intrinsic value. Managers must make their organizations more transparent to investors; they must promise only those results they have a legitimate prospect of delivering and be willing to inform the market when they believe their stock to be overvalued. [source] INVESTOR RELATIONS, LIQUIDITY, AND STOCK PRICESJOURNAL OF APPLIED CORPORATE FINANCE, Issue 4 2000Michael J. Brennan Although the first investor relations department was established by General Electric as long ago as 1952, the role of investor relations (IR) is one that has largely escaped scientific analysis and academic scrutiny. This article attempts to demonstrate the importance of a company's IR activities for its stock price by establishing a clear chain of causation between the following: 1,corporate IR activities and the number of stock analysts who follow the firm; 2,the number of analysts who follow the firm and the liquidity of trading in the firm's shares; 3,the liquidity of the firm's shares and its required rate of return, or cost of capital. The authors begin by presenting evidence that corporate IR activities, in the form of high levels of disclosure and presentations to investment analysts, increase the number of analysts who follow the firm by reducing their cost of acquiring information. Studies have also shown that more effective IR tends to improve the accuracy of analyst forecasts and the degree of agreement among analysts. Second, the authors summarize their own research showing that the number of analysts who follow a firm has a positive effect on the liquidity of the firm's shares. More specifically, their findings can be interpreted as saying that, for the average company, coverage by six additional analysts reduces "market-impact costs" (using a measure known as Kyle's lambda) by 28%, holding volume constant. And when the indirect effect of increased analyst coverage through expanded volume is taken into account, the reduction in trading costs is estimated to be as high as 85%. The final link in the chain of analysis is the growing evidence (much of it reviewed in the preceding article) that increased liquidity leads to a lower cost of capital and thus higher stock prices. In sum, a firm can reduce its cost of capital and increase its stock price through more effective investor relations activities, which reduce the cost of information to the market and to investment analysts in particular. [source] Does the Capitalization of Development Costs Improve Analyst Forecast Accuracy?JOURNAL OF INTERNATIONAL FINANCIAL MANAGEMENT & ACCOUNTING, Issue 1 2010Evidence from the UK It has been documented that investments in Research and Development (R&D) are associated with increased errors and inaccuracy in earnings forecasts made by financial analysts. These deficiencies have been generally attributed to information complexity and the uncertainty of the future benefits of R&D. This paper examines whether the capitalization of development costs can reduce analyst uncertainty about the future economic outcome of R&D investments, provide outsiders with a better matching of future R&D-related revenues and costs, and therefore promote accuracy in analyst forecasts. UK data is used, because accounting rules in the United Kingdom permitted firms to conditionally capitalize development costs even before the introduction of the International Financial Reporting Standards. The choice to expense R&D rather than conditionally capitalize development costs is found to relate positively to signed analyst forecast errors. This finding is robust to controlling for the influence of other factors that may affect errors, as well as for the influence of R&D investments on forecast errors. The decision to capitalize versus expense is not observed to have a significant influence on analyst forecast revisions. The findings are interpreted as evidence that the choice to capitalize as opposed to expense may help to reduce deficiencies in analyst forecasts; hence, is informative for users of financial statements. Increased informativeness is expected to have repercussions for the effectiveness with which analysts produce earnings forecasts, and, as a result, market efficiency. [source] Analysts' Forecasts in Asian-Pacific Markets: The Relationship among Macroeconomic Factors, Accounting Systems, Bias and AccuracyJOURNAL OF INTERNATIONAL FINANCIAL MANAGEMENT & ACCOUNTING, Issue 3 2006Ervin L. Black In this study, we describe determinants of accuracy/bias of analysts' forecasts in 13 economies of the Asian-Pacific region. Examination of the accuracy of analysts' earnings forecasts allows us to judge how accounting systems and macroeconomic distinctions in this region affect earnings predictability. As many investors rely on analysts' earnings forecasts instead of producing their own, the growth of international investment means forecasts in non-US markets will become increasingly important to investors worldwide. Using a sample of firms with data available on Global Vantage and I/B/E/S International, we find that the analysts on average have a pessimistic bias in Asian-Pacific markets. We examine whether macroeconomic factors explain part of the difference in the size of analyst forecast errors, using the global competitiveness rankings of the World Economic Forum (WEF). We expect that those nations which are more open to foreign trade and investment and are ranked more highly by the WEF in its Global Competitiveness Index will also have more accurate analyst forecasts, as increased global competitiveness demands greater integration into the world economy, and such integration should lead to more transparent financial statements and more accurate earnings forecasts. Our findings are consistent with this prediction. We also find that countries with low book-tax conformity have more accurate earnings forecasts. [source] On the Performance of Naïve, Analyst and Composite Earnings Forecasts: Evidence from Hong KongJOURNAL OF INTERNATIONAL FINANCIAL MANAGEMENT & ACCOUNTING, Issue 2 2003Joseph W. Cheng In this paper, we compare the information content and performance of naïve, analyst and composite forecasts in Hong Kong. Empirical evidence shows that superior performance can be obtained by a composite measure combining both analyst and naïve forecasts. In addition, analyst forecasts become more conditionally efficient over the naïve model as the actual announcement approaches. The superiority and timing advantage of analyst forecasts suggest that more emphasis should be placed on the services of analysts for predicting future earnings figures, particularly when the announcement is approaching. [source] Market Sidedness: Insights into Motives for Trade InitiationTHE JOURNAL OF FINANCE, Issue 1 2009ASANI SARKAR ABSTRACT We infer motives for trade initiation from market sidedness. We define trading as more two-sided (one-sided) if the correlation between the number of buyer- and seller-initiated trades increases (decreases), and assess changes in sidedness (relative to a control sample) around events that identify trade initiators. Consistent with asymmetric information, trading is more one-sided before merger news. Consistent with belief heterogeneity, trading is more two-sided before earnings and macro announcements with greater dispersion in analyst forecasts, and after news with larger announcement surprises. We examine the codeterminacy of sidedness, bid-ask spread, volatility, number of trades, and order imbalance. [source] Analyst forecasts and price discovery in futures markets: The case of natural gas storageTHE JOURNAL OF FUTURES MARKETS, Issue 5 2009Gerald D. Gay We investigate analyst forecasts in a unique setting, the natural gas storage market, and study the contribution of analysts in facilitating price discovery in futures markets. Using a high-frequency database of analyst storage forecasts, we show that the market appears to condition expectations regarding a weekly storage release on the analyst forecasts and beyond that of various statistical-based models. Further, we find that the market looks through the reported consensus analyst forecast and places differential emphasis on the individual forecasts of analysts according to their prior accuracy. Also, the market appears to place greater emphasis on analysts' long-term accuracy than on their recent accuracy. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 29:451,477, 2009 [source] The Effect of Regulation Fair Disclosure on Conference Calls: The Case of Earnings Surprises,ASIA-PACIFIC JOURNAL OF FINANCIAL STUDIES, Issue 6 2009Bok Baik Abstract While conference calls have been widely used as a communication tool between firms and investors, little research has examined the effect of this voluntary disclosure metric on analyst forecasts. In this paper, we examine whether firms use conference calls to guide down analysts' earnings forecasts, thereby avoiding negative earnings surprises before and after Regulation FD. Our findings show that firms hosting conference calls are more likely to guide analysts' forecasts downward and, as a result, they tend to successfully avoid negative earnings surprises in the pre Reg FD period. However, we do not find such relations in the post Reg FD period. We also find that the market reacts positively to firms hosting conference calls only in the post Reg FD period, consistent with the view that the market rewards a reduction in managers' opportunistic guidance to meet the analysts' earnings estimate. [source] Earnings Uncertainty and Analyst Forecast Herding,ASIA-PACIFIC JOURNAL OF FINANCIAL STUDIES, Issue 4 2009Minsup Song Abstract This study empirically investigates how a firm's earnings uncertainty affects analysts' herding behaviors in earnings forecasts. Trueman (1994) and Graham (1999) analytically predict that analysts have higher incentives to issue a herding forecast when a firm's earnings uncertainty is low. We test this analytical prediction using a proxy for bold forecasts used by Gleason and Lee (2003) and Clement and Tse (2005). We classify analysts' earnings forecasts as bold when an analyst's revised forecast is larger (or smaller) than both the analyst's own prior forecast and the mean consensus forecast of other analysts immediately prior to the analyst's forecast. Earnings uncertainty is measured by standard deviation of time-serial earnings forecast errors. A logit regression result shows a positive relation between bold forecasts and earnings uncertainty after controlling for analyst characteristics, which is consistent with the prediction by Trueman (1994) and Graham (1999). We also find that as earnings uncertainty increases, the accuracy of analysts' bold forecasts relative to consensus forecast accuracy also increases. These results imply that analysts are active in producing new relevant information about firms when earnings uncertainty is higher. [source] High-involvement work practices and analysts' forecasts of corporate earningsHUMAN RESOURCE MANAGEMENT, Issue 4 2006George S. Benson Research has shown that high-involvement work practices are positively related to corporate financial performance. However, it is unknown if investors are able to use information on high-involvement practices to predict the performance of specific companies. In this study, we examine earnings forecasts for a sample of Fortune 1000 firms and find professional stock analysts consistently underestimated the earnings of firms that made greater use of high-involvement practices during the 1990s. Based on data collected from newspaper articles and annual reports, we argue that these lower estimates resulted from a lack of information on innovative HR practices. Recommendations to managers for disseminating information on and leveraging highinvolvement HR practices are discussed. © 2006 Wiley Periodicals, Inc. [source] Confirming Management Earnings Forecasts, Earnings Uncertainty, and Stock ReturnsJOURNAL OF ACCOUNTING RESEARCH, Issue 4 2003Michael Clement In this study we examine the association among confirming management forecasts, stock prices, and analyst expectations. Confirming management forecasts are voluntary disclosures by management that corroborate existing market expectations about future earnings. This study provides evidence that these voluntary disclosures affect stock prices and the dispersion of analyst expectations. Specifically, we find that the market's reaction to confirming forecasts is significantly positive, indicating that benefits accrue to firms that disclose such forecasts. In addition, although we find no significant change in the mean consensus forecasts (a proxy for earnings expectations) around the confirming forecast date, evidence indicates a significant reduction in the mean and median consensus analyst dispersion (a proxy for earnings uncertainty). Finally, we document a positive association between the reduction of dispersion of analysts' forecasts and the magnitude of the stock market response. Overall, the evidence suggests that confirming forecasts reduce uncertainty about future earnings and that investors price this reduction of uncertainty. [source] High-Technology Intangibles and Analysts' ForecastsJOURNAL OF ACCOUNTING RESEARCH, Issue 2 2002Orie E. Barron This study examines the association between firms' intangible assets and properties of the information contained in analysts' earnings forecasts. We hypothesize that analysts will supplement firms' financial information by placing greater relative emphasis on their own private (or idiosyncratic) information when deriving their earnings forecasts for firms with significant intangible assets. Our evidence is consistent with this hypothesis. We find that the consensus in analysts' forecasts, measured as the correlation in analysts' forecast errors, is negatively associated with a firm's level of intangible assets. This result is robust to controlling for analyst uncertainty about a firm's future earnings, which we also find to be higher for firms with high levels of internally generated (and expensed) intangibles. Given that analyst uncertainty increases and analyst consensus decreases with the level of a firm's intangible assets, we also expect and find that the degree to which the mean forecast aggregates private information and is more accurate than an individual analyst's forecast increases with a firm's intangible assets. Finally, additional analysis reveals that lower levels of analyst consensus are associated with high-technology manufacturing companies, and that this association is explained by the relatively high R&D expenditures made by these firms. Overall, our results are consistent with financial analysts augmenting the financial reporting systems of firms with higher levels of intangible assets (in terms of contributing to more accurate earnings expectations), particularly R&D-driven high-tech manufacturers. [source] Market Reactions to Warnings of Negative Earnings Surprises: Further EvidenceJOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 7-8 2008Weihong Xu Abstract:, This study examines two plausible explanations for Kasznik and Lev's (1995) counterintuitive finding that warning firms are subject to more negative market returns than no-warning firms. Namely, are the more negative market reactions to warning firms due to their poorer future earnings performance or due to investor overreaction? I find that, compared with no-warning firms, warning firms experience more severe one-year-ahead earnings declines and these earnings declines can explain the stronger market returns to warning firms. However, my results do not support an investor overreaction explanation. The tests of subsequent abnormal returns of warning firms over various windows do not detect stock return reversals due to correction for overreaction. In addition, the greater revisions in analysts' forecasts for warning firms are found to enhance analyst accuracy rather than increase analyst pessimism. Collectively, my results suggest that the more negative market reactions to warning firms reflect investors' rational anticipation of more severe declines in future earnings for warning firms rather than investor overreaction. [source] Accruals Management to Achieve Earnings Benchmarks: A Comparison of Pre-managed Profit and Loss FirmsJOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 5-6 2006Abhijit Barua Abstract:, This study examines whether firms with profits before accruals management are more likely than firms with losses before accruals management to meet or exceed earnings benchmarks when pre-managed earnings are below those benchmarks. We extend Brown (2001) by documenting that the differential propensity to achieve earnings benchmarks by profitable and nonprofitable firms results from differential accruals management behavior. We find that firms with profits before accruals management are more likely than firms with losses before accruals management to have pre-managed earnings below both analysts' forecasts and prior period earnings and reported earnings above these benchmarks. [source] A Simultaneous Equations Analysis of Analysts' Forecast Bias, Analyst Following, and Institutional OwnershipJOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 7-8 2003Lucy F. Ackert In this paper we use a simultaneous equations model to examine the relationship between analysts' forecasts, analyst following, and institutions' investment decisions. Estimates of our three equation model using US data indicate that higher institutional demand leads to greater optimism among analysts and lower analyst following. At the same time, institutional demand increases with increasing optimism in analysts' forecasts but decreases with analyst following. We also investigate firm characteristics as determinants of analysts' and institutions' decisions. Empirical estimates of the effects of these characteristics indicate that agency-driven behavioral considerations are significant. [source] The Implications of Dispersion in Analysts' Earnings Forecasts for Future ROE and Future ReturnsJOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 1-2 2000Bong H. Han Dispersion in analysts' forecasts is empirically evaluated by associating dispersion with a firm's future accounting rate of return-on-equity (ROE) and future returns. Forecast dispersion is significantly and negatively associated with future ROE, consistent with the notion that firm disclosures and analysts' information acquisition efforts increase as firm prospects improve. Forecast dispersion is negatively associated with future returns. This appears due to the implications of dispersion for future ROE, and suggests that the market does not immediately assimilate the information contained in forecast dispersion. Dispersion also conveys information about firm-specific risk not captured by beta and firm size. [source] Dissemination of Accruals Information, Role of Semi-Annual Reporting, and Analysts' Earnings Forecasts: Evidence from JapanJOURNAL OF INTERNATIONAL FINANCIAL MANAGEMENT & ACCOUNTING, Issue 2 2010Keiichi Kubota Our study investigates the effects of dissemination of accounting accruals information on stock prices using Japanese annual reports as our sample. We conduct month-by-month detailed analyses of price adjustment behavior with a particular focus on revisions of analysts' earnings forecasts and changes in trading volume around the period of upcoming semi-annual reports. We find that analysts' forecasts are often revised around this time, and analysts use this as auxiliary information. In addition, an accompanying re-adjustment of abnormal returns and an increase in trading volume are observed. Our findings demonstrate that informational uncertainty initially triggered by the announcement of annual reports decreases as semi-annual reports are disclosed and analysts change their earnings forecasts, and confirms the importance of semi-annual reporting. [source] | ||||||||||||||||||||||