The Impacts Of CEO Turnover & Degree Of Internationalization On The Accuracy Of Analyst Forecasts

This study analyzes the impact of CEO turnover on the accuracy of analyst forecasts. Specifically, it examines the level of information that becomes available to analysts covering firms with different levels of internationalization, a proxy for firm complexity, during periods surrounding these events. After controlling for analyst and firm characteristics, along with regulatory period variables, this study finds that the accuracy of analyst forecasts improves in periods immediately following the turnover event. Results further indicate that the accuracy in the post-turnover period is greater for firms with lower levels of internationalization. In general, these findings are consistent with prior research describing the improvement of forecasts surrounding the CEO turnover event, the positive link between forecast accuracy and company disclosures, and finally, the negative link between analyst forecast accuracy and the complexity of the forecasting task.

Download Full-text

Audit Quality and Analyst Forecast Accuracy: The Impact of Forecast Horizon and Other Modeling Choices

Auditing A Journal of Practice & Theory ◽

10.2308/ajpt-51216 ◽

2015 ◽

Vol 35 (2) ◽

pp. 167-185 ◽

Cited By ~ 2

Author(s):

Yi (Ava) Wu ◽

Mark Wilson

Keyword(s):

Audit Quality ◽

Forecast Accuracy ◽

Earnings Forecasts ◽

Analyst Forecasts ◽

Data Availability ◽

Analyst Forecast ◽

Forecast Horizon ◽

Financial Reports ◽

Decision Usefulness ◽

The Impact

SUMMARY The accuracy and other properties of analyst earnings forecasts represent potentially useful proxies for the impact of audit quality on client financial reports. Extant research in the auditing literature, however, is characterized by diametrically opposite predictions and inconsistent findings regarding the relationship between audit quality and analyst forecast accuracy. We argue that a potential reason for the inconsistency in the literature reflects these studies' focus on end-of-year forecast accuracy, which is subject to competing effects of audit quality. High-quality auditors may simultaneously improve forecast accuracy through their impact on the decision usefulness of clients' prior period reports, and reduce forecast accuracy by constraining client attempts to manage earnings in the direction of the consensus forecast. We argue and present evidence in support of the conjecture that analysts' beginning-of-year forecasts are a superior metric for identifying the impact of audit quality on the properties of analyst forecasts because the decision usefulness effect of audit quality should be dominant with respect to those forecasts. Data Availability: Data are available from sources identified in the article.

Download Full-text

Fair value intensity and analyst forecasts

Journal of Economic and Financial Sciences ◽

10.4102/jef.v11i1.172 ◽

2018 ◽

Vol 11 (1) ◽

Author(s):

Wessel M. Badenhorst

Keyword(s):

Forecast Accuracy ◽

Earnings Forecasts ◽

Fair Value ◽

Analyst Forecasts ◽

The United States ◽

Book Value ◽

The United Kingdom ◽

Value Measurement ◽

The Impact ◽

Book Values

Analysts’ earnings and book value forecasts play an important role in price discovery in equity markets. As the role of fair value measurements in accounting increases, the impact on analysts’ ability to accurately forecast earnings and book values is unclear. This article develops a method to calculate the degree of fair value measurement in financial statements and investigates the impact thereof on the accuracy of analysts’ book value and earnings forecasts, using a sample of firms listed in the United States and the United Kingdom from 2010 to 2014. Relying on multivariate regression findings, the article shows that greater fair value intensity decreases the 12-month analyst forecast accuracy for earnings in both countries. Moreover, there is some evidence that higher fair value intensity decreases the accuracy of analysts’ book value forecasts. It therefore appears that increased fair value intensity under a mixed measurement approach limits the ability of analysts to forecast earnings, without a compensating impact on forecasts of book values.

Download Full-text

The Impact of Integrated Reporting on Analysts’ Forecasts

International Journal of Economics and Finance ◽

10.5539/ijef.v12n1p76 ◽

2019 ◽

Vol 12 (1) ◽

pp. 76 ◽

Cited By ~ 1

Author(s):

Romy Bakker ◽

Georgios Georgakopoulos ◽

Virginia - Athanasia Sotiropoulou ◽

Kanellos S. Tountas

Keyword(s):

Positive Impact ◽

Forecast Accuracy ◽

Analyst Forecast ◽

Forecast Errors ◽

Integrated Reporting ◽

Big 4 ◽

Audit Firms ◽

Sustainability Disclosure ◽

The Impact ◽

The Relationship

Shareholders are very interested in the relationship between Integrated Reporting and analyst forecast accuracy. Integrated Reporting is deemed to reduce information asymmetry between the company and shareholders. The purpose of this paper is to provide evidence on the relationship between Integrated Reporting and analyst forecast accuracy. Analyst forecast accuracy is examined for a global sample of companies that adopted Integrated Reporting, companies that get assurance on Integrated Reporting, companies that receive assurance on their integrated reports by one of the Big 4, and for a south african sample, companies that are mandated to use Integrated Reporting. Information for analysts’ forecasts is retrieved from the I/B/E/S database and information for Integrated Reporting is retrieved from the GRI Sustainability Disclosure Database. We do not find a significant impact of Integrated Reporting on analyst forecast errors. Similarly, attestation of the reports by bigger or smaller audit firms does not seem to affect analysts’ forecast accuracy. In South Africa however, a positive impact on analysts’ forecast accuracy is observed suggesting that the effect of mandatory integrated disclosures is important for analysts’ forecasts.

Download Full-text

Types of politically connected firms and analysts' earnings forecast

Journal of Applied Accounting Research ◽

10.1108/jaar-05-2020-0084 ◽

2021 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Khairul Anuar Kamarudin ◽

Wan Adibah Wan Ismail ◽

Iman Harymawan ◽

Rohami Shafie

Keyword(s):

Information Asymmetry ◽

Boards Of Directors ◽

Forecast Accuracy ◽

Earnings Forecasts ◽

Analyst Forecast ◽

Earnings Forecast ◽

Content Type ◽

Thomson Reuters ◽

Different Types ◽

The Impact

PurposeThis study examined the effect of different types of politically connected (PCON) Malaysian firms on analysts' forecast accuracy and dispersion.Design/methodology/approachThe study identified different types of PCON firms according to Wong and Hooy's (2018) classification, which divided political connections into government-linked companies (GLCs), boards of directors, business owners and family members of government leaders. The sample covered the period 2007–2016, for which earnings forecast data were obtained from the Institutional Brokers' Estimate System (IBES) database and financial data were extracted from Thomson Reuters Fundamentals. We deleted any market consensus estimates made by less than three analysts and/or firms with less than three years of analyst forecast information to control for the impact of individual analysts' personal attributes.FindingsThe study found that PCON firms were associated with lower analyst forecast accuracy and higher forecast dispersion. The effect was more salient in GLCs than in other PCON firms, either through families, business ties or boards of directors. Further analyses showed that PCON firms—in particular GLCs—were associated with more aggressive reporting of earnings and poorer quality of accruals, hence providing inadequate information for analysts to produce accurate and less dispersed earnings forecasts. The results were robust even after addressing endogeneity issues.Research limitations/implicationsThis study found new evidence of the impact of different types of PCON firms in exacerbating information asymmetry, which was not addressed in prior studies.Practical implicationsThis study has a significant practical implication for investors that they should be mindful of high information asymmetry in politically connected firms, particularly government-linked companies.Originality/valueThis is the first study to provide evidence of the impact of different types of PCON firms on analysts' earnings forecasts.

Download Full-text

Shareholder Protection And Forecast Bias

Journal of Applied Business Research (JABR) ◽

10.19030/jabr.v22i2.1434 ◽

2011 ◽

Vol 22 (2) ◽

Author(s):

Seung-Woog (Austin) Kwag

Keyword(s):

Forecast Accuracy ◽

Analyst Forecasts ◽

Analyst Forecast ◽

Font Size ◽

Forecast Bias ◽

Empirical Results ◽

Shareholder Protection ◽

Analyst Optimism

This research explores whether shareholder protection influences analyst optimism and forecast accuracy in a global setting. The first set of empirical results suggests that, as commonly observed in the existing domestic literature, analyst optimism characterizes analysts’ forecasts in the 19 sample countries. Further empirical results provide evidence that analyst forecasts issued in countries with strong shareholder protection laws are less optimistic and more accurate than analyst forecasts published in countries with weak protection laws. It is also observed that analyst forecast is superior to a naïve model of no change in earnings. (JEL: G15, G18)

Download Full-text

Analysts’ forecasts timeliness and accuracy post-XBRL

International Journal of Accounting and Information Management ◽

10.1108/ijaim-05-2017-0061 ◽

2019 ◽

Vol 27 (1) ◽

pp. 151-188

Author(s):

Sherwood Lane Lambert ◽

Kevin Krieger ◽

Nathan Mauck

Keyword(s):

Critical Role ◽

Forecast Accuracy ◽

Financial Statements ◽

Analyst Forecasts ◽

Financial Statement ◽

Future Research ◽

Content Type ◽

Cent Error ◽

The Impact ◽

The Relationship

Purpose To the authors’ knowledge, this paper is the first to use Detail I/B/E/S to study directly the timeliness of security analysts’ next-year earnings-per-share (EPS) estimates relative to the SEC filings of annual (10-K) and quarterly (10-Q) financial statements. Although the authors do not prove a causal relationship, they provide evidence that the average time from firms’ filings of 10-Ks and 10-Qs to the release of analysts’ annual EPS forecasts during short timeframes (for example, 15-day timeframe from a 10-K’s SEC file date) subsequent to the 10-K and 10-Q filing dates significantly shortened with XBRL implementation and then remained relatively constant following implementation. Design/methodology/approach Using filing dates hand-collected from the SEC website for 10-Ks during 2009-2011 and filing dates for 10-Ks and 10-Qs during 2003-2014 input from Compustat along with analysts’ estimated values for next year EPS, actual estimated next year EPS realized and estimate announcement dates in Detail I/B/E/S, the authors study the days from 10-K and 10-Q file dates to announcement dates and the per cent errors for individual estimates during per- and post-XBRL eras. Findings The authors find that analysts are announcing next-year EPS forecasts significantly more frequently and in significantly shorter time in zero to 15 days immediately following 10-K and 10-Q file dates post-XBRL as compared to pre-XBRL. However, the authors do not find a significant change in forecast accuracy post-XBRL as compared to pre-XBRL. Research limitations/implications Because this study uses short timeframes immediately following the events (filings of 10-Ks and 10-Qs), the relationship between 10-Ks and 10-Qs with and without XBRL and improved forecast timeliness is strengthened. However, even this strengthened difference-in-difference methodology does not establish causality. Future research may determine whether XBRL or other factors cause the improved forecast timeliness the authors’ evidence. Practical implications This improved efficiency may become critical if financial statement reporting expands as a result of new innovations such as Big Data and continuous reporting. In the future, users may be able to electronically connect to financial statement data that firms are maintaining on a perpetual basis on the SEC website and continuously monitor and analyze the financial statement data dynamically in real time. If so, then unquestionably, XBRL will have played a critical role in bringing about this future innovation. Originality/value Whereas previous studies have utilized Summary IBES data to assess the impact of XBRL on analyst forecasts, the authors use Detail IBES to study the effects of XBRL adoption directly by measuring days from 10-K and 10-Q file dates in Compustat to each estimate’s announcement date recorded in IBES and by computing the per cent error using each estimate’s VALUE and ACTUAL recorded in Detail IBES. The authors are the first to evidence a significant shortening in average days and an increase in per cent of 30-day counts in the zero- to 15-day timeframe immediately following the fillings of 10-K s and 10-Qs.

Download Full-text

Investor Relations and Information Assimilation

The Accounting Review ◽

10.2308/accr-52200 ◽

2018 ◽

Vol 94 (2) ◽

pp. 105-131 ◽

Cited By ~ 19

Author(s):

Kimball Chapman ◽

Gregory S. Miller ◽

Hal D. White

Keyword(s):

Media Coverage ◽

Stock Price ◽

Price Discovery ◽

Forecast Accuracy ◽

Price Volatility ◽

Analyst Forecasts ◽

Analyst Forecast ◽

Investor Relations ◽

Stock Price Volatility ◽

Information Assimilation

ABSTRACT This paper examines whether investor relations (IR) officers provide value by facilitating the assimilation of firm information by the market. We find that firms with IR officers have lower stock price volatility, lower analyst forecast dispersion, higher analyst forecast accuracy, and quicker price discovery, consistent with IR officers aiding market participants in their assimilation of firm information. We also show that our findings are stronger for firms with longer-tenured IR officers. Finally, we find that when firms transition from a long-tenured IR officer to a new IR officer, stock price volatility increases, analyst forecasts become more disperse and less accurate, and the price discovery process slows, despite no significant change in the firm's disclosures, media coverage, or performance around the turnover. Collectively, these findings suggest that in-house IR officers, particularly those with greater experience, help facilitate information assimilation by the market, which has positive market effects. JEL Classifications: G14; M40; M41.

Download Full-text

Analysts issuing forecasts on weekends

International Journal of Accounting and Information Management ◽

10.1108/ijaim-03-2016-0024 ◽

2017 ◽

Vol 25 (2) ◽

pp. 201-216 ◽

Cited By ~ 2

Author(s):

Ling Liu

Keyword(s):

Capital Market ◽

Forecast Accuracy ◽

Ordinary Least Squares ◽

Analyst Forecast ◽

Content Type ◽

Information Release ◽

Emerging Trends ◽

Negative Effect ◽

The Right ◽

The Impact

Purpose This study aims to investigate the motivation of financial analysts issuing forecasts on weekends and the impact of such behavior on forecast accuracy and analysts’ careers. Design/methodology/approach Logistic regression and ordinary least squares models with Huber–White standard errors were used in this study. Findings This paper first documented the emerging trends of the weekend forecasts after 2000. Longitudinal data from 2002 to 2011 validated that analysts’ conscientious timing of information release in line with their workload and confidence level gives more accurate forecasts. Further, given the same accuracy, analysts exhibiting diffident behaviors (analysts who are predicted to work on weekdays but in fact work on weekends) are not fired or demoted by brokerage houses, but those exhibiting inactive behaviors (analysts who are predicted to work on weekends but did not do so) are more likely to be dismissed or demoted by brokerage houses, indicating that brokerage houses are aware of the negative effect of both behaviors, but treat them differently. Research limitations/implications Weekend versus weekday proxies for an analyst’s timing of information release consider only one of many timing options. Other timing proxies, the nature and the composition of the information release of analysts are not examined in this study. Practical implications For practitioners, the results indicate that depending on the alignment, capital market can predict analysts’ future forecast accuracy, and hence, respond accordingly. For example, in addition to analyst forecast level or change, investors could pay attention to when the information is released to the market and possible reasons behind the choice of timing. Investors can thus better assess the forecast accuracy of one specific forecast and respond with the right action. Furthermore, analysts can better project their own forecast accuracy and career potential by assessing to what extent their forecasts are released conscientiously. Social implications This study examines analysts’ forecast behavior, but generate some insights on linking the analysts and investors in the capital market. Originality/value This study is the author’s original work.

Download Full-text

The Role Of Earnings Quality In Financial Analyst Forecast Accuracy

Journal of Applied Business Research (JABR) ◽

10.19030/jabr.v30i1.8300 ◽

2013 ◽

Vol 30 (1) ◽

pp. 255 ◽

Cited By ~ 4

Author(s):

David Salerno

Keyword(s):

Earnings Quality ◽

Financial Analysts ◽

Forecast Accuracy ◽

Earnings Forecasts ◽

Cash Flows ◽

Analyst Forecast ◽

Financial Reports ◽

The Individual ◽

Reported Earnings ◽

The Impact

This study investigates the impact that the quality of reported earnings has on the accuracy of financial analysts earnings forecasts. Extant research indicates that earnings attributes are important considerations to users of accounting information. One such attribute is earnings quality; often measured as the magnitude of accruals that do not convert to cash in a timely manner, where a poor match of cash flows and accruals indicates low earnings quality. Such accruals could reduce the usefulness of financial reports. This study uses two measurements of forecast accuracy to assess the impact that earnings quality has on the forecast accuracy of financial analysts. Following prior research, one measurement considers the environment in which the analyst operates and compares their accuracy to that of their peers. The second compares the individual analyst forecast to the actual reported earnings. For both measurements of accuracy the results show that higher earnings quality is associated with improved forecast accuracy.

Download Full-text

The Impact of CEO Turnover On Security Analysts Forecast Accuracy

Journal of Applied Business Research (JABR) ◽

10.19030/jabr.v14i4.5653 ◽

2011 ◽

Vol 14 (4) ◽

pp. 71 ◽

Cited By ~ 3

Author(s):

Mehdi Sheikholeslami ◽

Michael D. Wilson ◽

J. Roger Selin

Keyword(s):

Financial Analysts ◽

Control Sample ◽

Forecast Accuracy ◽

Earnings Forecasts ◽

Ceo Turnover ◽

Sample Design ◽

Security Analysts ◽

The Impact

This paper reports the results of a study on the impact of CEO turnover on the accuracy of financial analysts earnings forecasts. Using Value Lines earnings forecasts and a control sample design, the study reveals marginally more accurate earnings forecasts for CEO change firms after CEO turnover. This result may be attributed to the publicity surrounding the CEO replacements.

Download Full-text