scholarly journals "The Impact Of CEO Turnover On Security Analysts' Forecast Accuracy" - A Comment

2011 ◽  
Vol 16 (1) ◽  
Author(s):  
David T. Doran
Keyword(s):  
Forecast Error ◽  
Forecast Accuracy ◽  
Earnings Forecasts ◽  
Nonparametric Tests ◽  
Percentage Error ◽  
Control Group ◽  
Security Analysts ◽  
Error Measures ◽  
Forecast Precision ◽  
The Impact

A recent Journal of Applied Business Research article by Sheikholesami, Wilson and Slevin (1998) examined the accuracy of security analysts' earnings forecasts for CEO change firms relative to a control group.  The authors applied ANOVA on Value Line percentage forecast error measures and found "marginally significant" results indicating "that precision improved more for CEO change firms than for control firms."  Doran (1998) tests for superior methods when scrutinizing forecast error.  He finds percentage forecast error data to be severely non-normal, and demonstrates that nonparametric tests based upon ranks are superior to parametric methods.  If analysts' earnings forecast precision actually improves more for CEO change firms, test results should be stronger using rank values instead of discrete percentage error measures.

Absolute Forecast Errors of Earnings in Malaysian IPO Prospectuses: The Impact of Ethnic Diversity

2014 ◽  
Vol 68 (3) ◽  
Author(s):  
Mohammed Abdullah Ammer ◽  
Nurwati A. Ahmad-Zaluki
Keyword(s):  
Ethnic Diversity ◽  
Boards Of Directors ◽  
Forecast Error ◽  
Forecast Accuracy ◽  
Earnings Forecasts ◽  
Ordinary Least Squares ◽  
Audit Committees ◽  
Earnings Forecast ◽  
Forecast Errors ◽  
The Impact

The main focus of this paper is the earnings forecast, a vital information included in IPO prospectus. Specifically, our paper examined the impact of ethnic diversity groups on the boards of directors and audit committees in terms of earnings forecast accuracy. We are motivated by the lack of prior studies related to investigating IPO earnings forecast. Cross-sectional Ordinary Least Squares (OLS) modeling was conducted on 190 Malaysian IPOs from 2002 to 2012. For the evaluation of earnings forecast accuracy, we mathematically used the metric of Absolute Forecast Error (AFER). Moreover, for the test of robustness, we used the metric of Squared Forecast Error (SQFER) as error measurement, as it mostly deals with large errors. The empirical results indicate that the ethnic diversity groups on boards and audit committees have an impact on the accuracy of earnings forecasts. However, the evidence is significant for Chinese and Malay serving on boards but insignificant in terms of Chinese and Malay serving on audit committee. The findings indicate that multi-ethnic groups in Malaysian IPO companies could hinder the capability of IPO companies to achieve accurate earnings forecasts in their prospectuses.

Benefits of management disclosure precision on analysts’ forecasts

2014 ◽  
Vol 13 (4) ◽  
pp. 371-399 ◽  
Author(s):  
Yu-Ho Chi ◽  
David A. Ziebart
Keyword(s):  
Forecast Accuracy ◽  
Earnings Forecasts ◽  
Forecast Errors ◽  
Management Earnings Forecasts ◽  
Earnings Guidance ◽  
Short Term ◽  
Content Type ◽  
Management Forecast ◽  
Forecast Precision ◽  
The Impact

Purpose – The purpose of this paper is to examine the impact of management’s choice of forecast precision on the subsequent dispersion and accuracy of analysts’ earnings forecasts. Design/methodology/approach – Using a sample of 3,584 yearly management earnings per share (EPS) forecasts and 10,287 quarterly management EPS forecasts made during the period of 2002-2007 and collected from the First Call database, the authors controlled for factors previously found to impact analysts’ forecast accuracy and dispersion and investigate the link between management forecast precision and attributes of the analysts’ forecasts. Findings – Results provide empirical evidence that managements’ disclosure precision has a statistically significant impact on both the dispersion and the accuracy of subsequent analysts’ forecasts. It was found that the dispersion in analysts’ forecasts is negatively related to the management forecast precision. In other words, a precise management forecast is associated with a smaller dispersion in the subsequent analysts’ forecasts. Evidence consistent with accuracy in subsequent analysts’ forecasts being positively associated with the precision in the management forecast was also found. When the present analysis focuses on range forecasts provided by management, it was found that lower precision (a larger range) is associated with a larger dispersion among analysts and larger forecast errors. Practical implications – Evidence suggests a consistency in inferences across both annual and quarterly earnings forecasts by management. Accordingly, recent calls to eliminate earnings guidance through short-term quarterly management forecasts may have failed to consider the linkage between the attributes (precision) of those forecasts and the dispersion and accuracy in subsequent analysts’ forecasts. Originality/value – This study contributes to the literature on both management earnings forecasts and analysts’ earnings forecasts. The results assist in policy deliberations related to calls to eliminate short-term management earnings guidance.

scholarly journals The Impact of CEO Turnover On Security Analysts Forecast Accuracy

2011 ◽  
Vol 14 (4) ◽  
pp. 71 ◽  
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

<span>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.</span>

scholarly journals Pricing Strategies of Multichannel Apparel Supply Chain Based on Showrooming and Information Sharing

2021 ◽  
Vol 2021 ◽  
pp. 1-23
Author(s):  
Shanshan Wang ◽  
Tian Luo ◽  
Daofang Chang
Keyword(s):  
Supply Chain ◽  
Information Sharing ◽  
Forecast Error ◽  
Forecast Accuracy ◽  
Service Level ◽  
Clothing Industry ◽  
Pricing Strategies ◽  
Information Barriers ◽  
The Impact ◽  
Share Information

This paper examines the influence of information forecast accuracy on the profits of the supply chain under the circumstance of a multichannel apparel supply chain. Due to the emergence of multichannel, customer showrooming behavior is becoming increasingly prevalent. For example, consumers usually buy garments online after experiencing the service in the traditional bricks and mortar in the clothing industry. Meanwhile, there are often information barriers between the manufacturer and the retailer, which will affect enterprise decision-making. To solve these problems, this paper mainly investigates the information sharing and customer showrooming phenomenon, which includes four models: no information sharing without showrooming model (NN), information sharing without showrooming model (SN), no information sharing with showrooming model (NS), and information sharing with showrooming model (SS). The numerical analysis shows that under the impact of the forecast error, information sharing between channel members is more favorable than no information sharing when parameters satisfy certain conditions. From the perspectives of the retailer, the manufacturer, and the whole supply chain, customer showrooming behavior will bring them less profit. These conclusions mean that the retailer should share information with the manufacturer and adjust their service level and sales price to alleviate the effect of showrooming.

The impact of strategic deviance on analysts’ earnings forecasts: evidence from China

2019 ◽  
Vol 10 (3) ◽  
pp. 362-381
Author(s):  
Xiqiong He ◽  
Changping Yin
Keyword(s):  
Information Asymmetry ◽  
Corporate Strategy ◽  
Forecast Error ◽  
Environmental Uncertainty ◽  
Earnings Forecasts ◽  
Financial Information ◽  
Strategic Information ◽  
Content Type ◽  
Information Transparency ◽  
The Impact

Purpose The purpose of this paper is to explore the effect of firm’s deviant strategy on analysts’ earnings forecasts and further examine the effects of firm’s information transparency and environmental uncertainty on these relationships from information asymmetry perspective. Design/methodology/approach The sample includes listed firms on Shanghai and Shenzhen Stock Exchange during the period 2007-2013. Findings The results indicate that firms’ deviant strategies have effects on analysts’ earnings forecasts, in particular, firms with extreme strategies have less analysts following, larger forecast error and dispersion compared with firms following industry norms. Moreover, information transparency and environmental uncertainty have effects on the relationship between strategic deviance and analysts’ earnings forecasts. Practical implications The empirical results of this paper provide strong evidence that strategy information is an important source of information for analysts’ earnings forecasts, which shows that analysts should pay attention to not only financial information but also the strategic information, especially when the information is related to strategic choice. In addition, it is necessary for investors to focus on strategic information to have a better understanding on financial information of enterprises and make better investment decisions. Originality/value The findings of this study indicate that corporate strategic deviance has an effect on analysts’ earnings forecasting behavior. This study enriches research studies on corporate strategy and external stakeholders and complements related research on analysts’ earnings forecasts from strategic perspective and information asymmetry perspective.

The information content of managerial insider trading: evidence from analyst forecasts

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Omar Esqueda ◽  
Thanh Ngo ◽  
Daphne Wang
Keyword(s):  
Insider Trading ◽  
Fixed Effects ◽  
Information Dissemination ◽  
Forecast Accuracy ◽  
Earnings Forecasts ◽  
Ordinary Least Squares ◽  
Content Type ◽  
Forecast Bias ◽  
Forecast Precision ◽  
Insider Trades

PurposeThis paper examines the effect of managerial insider trading on analyst forecast accuracy, dispersion and bias. Specifically, the authors test whether insider-trading information is positively associated with the precision of earnings forecasts. In addition, this relationship between Regulation Fair Disclosure (FD) and the Galleon insider trading case is examined.Design/methodology/approachPooled ordinary least squares (Pooled OLS) rregressions with year-fixed effects, firm-fixed effects, and firm-level clustered standard errors are used. Our proxies for forecast precision are regressed on alternative measures of insider trading activities and a vector of control variables.FindingsInsider-trading information is positively associated with the precision of earnings forecasts. Analysts provide better forecast accuracy, less forecast dispersion and lower forecast bias among firms with insider trading in the six months leading to the forecast issues. In addition, bullish (bearish) insider trades are associated with increased (decreased) forecast bias. Insider trading information complements analysts' independent opinion and increases the precision of their forecast.Practical implicationsRegulators may pursue rules that promote the rapid disclosure of managerial insider trades, particularly given the increasing availability of Internet tools. Securities regulators may attempt to increase transparency and enhance the reporting procedures of corporate insiders, for example, using Internet sources with direct release to the public to ensure more timely information dissemination.Originality/valueThe authors document a positive association between earnings forecast precision and managerial insider trading up to six months prior to the forecast issue. This relationship is stronger after the Securities and Exchange Commission (SEC) prohibited the selective disclosure of material nonpublic information through Regulation FD. In addition, the association between insider trading and forecast accuracy has weakened after the Galleon insider trading case.

scholarly journals Fair value intensity and analyst forecasts

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.

scholarly journals Corporate Governance And The Quality Of Financial Disclosures

2010 ◽  
Vol 9 (6) ◽  
Author(s):  
Mark Myring ◽  
Rebecca Toppe Shortridge
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Forecast Accuracy ◽  
Reporting Quality ◽  
Earnings Forecasts ◽  
Quality Of Accounting Information ◽  
Financial Disclosures ◽  
Analyst Earnings ◽  
The Impact

Congress has recently enacted measures designed to improve corporate governance standards.  Regulators have asserted that strong corporate governance enhances the transparency and validity of financial statements.  Previous studies addressing the relationship between corporate governance and financial reporting quality yield mixed results.  This study employs analyst earnings forecasts to determine whether corporate governance procedures impact the quality of accounting information.  Following the work of Barron et al. (1998), we examined the impact of various measures of the strength of corporate governance on forecast accuracy and dispersion.  Our results provide mixed evidence to support the notion that the strength of corporate governance impacts the quality of financial statement information. 

scholarly journals Are Experienced Analysts More Accurate?

2011 ◽  
Vol 6 (8) ◽  
Author(s):  
Rich Fortin ◽  
James H. Gilkeson ◽  
Stuart E. Michelson
Keyword(s):  
Forecast Error ◽  
Forecast Accuracy ◽  
Earnings Forecasts ◽  
Specific Experience ◽  
Experience Levels ◽  
Time Period ◽  
General Experience ◽  
Annual Earnings ◽  
The Relationship ◽  
Analyst Experience

<p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt;"><span style="font-size: 10pt;"><span style="font-family: Times New Roman;">We examine the relationship between analyst experience and the accuracy of annual earnings forecasts using a 20-year sample (1983-2002) from the Thomson Financial First Call I/B/E/S database.<span style="mso-spacerun: yes;">&nbsp; </span>We test for this relationship using three different measures of forecast accuracy employed by prior researchers, which are regressed against measures of general experience and specific experience, along with five other controls, for four independent 5-year subperiods, as well as for the full 20-year period.<span style="mso-spacerun: yes;">&nbsp; </span>We find that general experience levels are positively associated with forecast accuracy (negatively associated with forecast error) in most subperiods for two of the three measures of forecast accuracy.<span style="mso-spacerun: yes;">&nbsp; </span>We also find, in contrast with the extant literature, that for two of the three measures of forecast accuracy and for most subperiods, specific experience does not have an association with forecast accuracy beyond that provided by the general experience measure. <span style="mso-spacerun: yes;">&nbsp;</span>Our results suggest that the relationship between forecast accuracy and analyst experience (as well as some other commonly examined analyst characteristics) is dependent on the measure of accuracy employed and the time period studied. </span></span></p>

Types of politically connected firms and analysts' earnings forecast

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.

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