Do Financial Analysts Fully Incorporate the Future Earnings Implications of Really Dirty Surplus into Their Earnings Forecasts?

2017 ◽  
Author(s):  
Thomas D. Dowdell ◽  
Sangwan Kim ◽  
Steve Lim
Keyword(s):  
Financial Analysts ◽  
Earnings Forecasts ◽  
Future Earnings ◽  
The Future

Delayed Security Price Adjustments to Financial Analysts' Forecasts of Annual Earnings

2001 ◽  
Vol 76 (4) ◽  
pp. 613-632 ◽  
Author(s):  
Pieter T. Elgers ◽  
May H. Lo ◽  
Ray J. Pfeiffer
Keyword(s):  
Financial Analysts ◽  
Earnings Forecasts ◽  
Security Market ◽  
Analyst Coverage ◽  
Future Earnings ◽  
Price Response ◽  
Portfolio Returns ◽  
Price Adjustments ◽  
Security Price ◽  
Annual Earnings

This paper documents that the weighting of analysts' annual earnings forecasts implicit in security prices is lower than the historical relation between financial analysts' forecasts and realized earnings. Short positions in securities in the bottom decile and long positions in the top decile of the crosssectional distribution of analysts' early-in-the-year earnings forecasts generate significant hedge-portfolio returns in the year after portfolio formation. This delayed price response is more pronounced for firms with relatively low analyst coverage, consistent with the premise that low financial analyst coverage is associated with a variety of factors that impede the information efficiency of the security market. The hedge-portfolio returns concentrate in the months of subsequent quarterly earnings announcements, suggesting that the delayed security price adjustments reflect the market's failure to incorporate information in analysts' forecasts about future earnings, rather than deficiencies in our conditional expectations of security returns.

Do Stock Prices Influence Analysts' Earnings Forecasts?

2013 ◽  
Vol 26 (1) ◽  
pp. 85-108 ◽  
Author(s):  
Jeffrey S. Miller ◽  
Lisa M. Sedor
Keyword(s):  
Stock Prices ◽  
Stock Price ◽  
Financial Analysts ◽  
Earnings Forecasts ◽  
Data Availability ◽  
Earnings Forecast ◽  
Future Earnings ◽  
Management Earnings Forecast ◽  
Stock Price Reaction ◽  
Made In

ABSTRACT This study uses an experiment with professional financial analysts to examine whether stock prices influence analysts' earnings forecasts. The findings indicate that analysts' revised forecasts made in response to a management earnings forecast differ depending on the level of uncertainty communicated by management's guidance and the stock price reaction to it. Lower (higher) stock price leads to lower (higher) analysts' forecasts when uncertainty about future earnings is high, but not when uncertainty about future earnings is low. Overall, the evidence suggests that the documented association between prior security returns and analysts' earnings forecasts is due, at least in part, to the influence of stock price on analysts' earnings forecasts. Data Availability: Contact the authors.

Concurrent Earnings Announcements and Analysts' Information Production

2019 ◽  
Vol 95 (1) ◽  
pp. 165-189 ◽  
Author(s):  
Matthew Driskill ◽  
Marcus P. Kirk ◽  
Jennifer Wu Tucker
Keyword(s):  
Earnings Announcements ◽  
Financial Analysts ◽  
Earnings Forecasts ◽  
Data Availability ◽  
Limited Attention ◽  
Conference Calls ◽  
Stock Recommendations ◽  
Rich Information ◽  
Sample Firm ◽  
Jel Classifications

ABSTRACT We examine whether financial analysts are subject to limited attention. We find that when analysts have another firm in their coverage portfolio announcing earnings on the same day as the sample firm (a “concurrent announcement”), they are less likely to issue timely earnings forecasts for the sample firm's subsequent quarter than analysts without a concurrent announcement. Among the analysts who issue timely earnings forecasts, the thoroughness of their work decreases as their number of concurrent announcements increases. In addition, analysts are more sluggish in providing stock recommendations and less likely to ask questions in earnings conference calls as their number of concurrent announcements increases. Moreover, when analysts face concurrent announcements, they tend to allocate their limited attention to firms that already have rich information environments, leaving behind firms in need of attention. Overall, our evidence suggests that even financial analysts, who serve as information specialists, are subject to limited attention. JEL Classifications: G10; G11; G17; G14. Data Availability: Data are publicly available from the sources identified in the paper.

scholarly journals Equity Incentives and Earnings Management

2005 ◽  
Vol 80 (2) ◽  
pp. 441-476 ◽  
Author(s):  
Qiang Cheng ◽  
Terry D. Warfield
Keyword(s):  
Earnings Management ◽  
Stock Ownership ◽  
Stock Performance ◽  
Future Earnings ◽  
Equity Incentives ◽  
Time Period ◽  
Earnings Surprises ◽  
The Future

This paper examines the link between managers' equity incentives—arising from stock-based compensation and stock ownership—and earnings management. We hypothesize that managers with high equity incentives are more likely to sell shares in the future and this motivates these managers to engage in earnings management to increase the value of the shares to be sold. Using stock-based compensation and stock ownership data over the 1993–2000 time period, we document that managers with high equity incentives sell more shares in subsequent periods. As expected, we find that managers with high equity incentives are more likely to report earnings that meet or just beat analysts' forecasts. We also find that managers with consistently high equity incentives are less likely to report large positive earnings surprises. This finding is consistent with the wealth of these managers being more sensitive to future stock performance, which leads to increased reserving of current earnings to avoid future earnings disappointments. Collectively, our results indicate that equity incentives lead to incentives for earnings management.

Stock Splits: Tests of the Earnings Signaling and Attention Directing Hypotheses Using Analyst Forecasts and Revisions

1994 ◽  
Vol 9 (3) ◽  
pp. 411-422 ◽  
Author(s):  
David T. Doran
Keyword(s):  
Earnings Forecasts ◽  
Analyst Forecasts ◽  
Analyst Forecast ◽  
Specific Level ◽  
Future Earnings ◽  
Earnings Information ◽  
Stock Split ◽  
Forecast Revision ◽  
Earnings Performance ◽  
Signaling Hypothesis

The major findings of this study are: (1) earnings performance of splitting firms is favorable relative to preevent longterm analyst (Value Line) forecasts; (2) analysts significantly revise earnings forecasts upward in response to stock split announcements; and (3) in the case of stock split announcing firms, there is a high correlation between future earnings performance and analyst forecast revision. These findings indicate that stock split announcements convey “permanent” earnings information to the market, and security analysts scrutinize the earnings signal at the firm specific level. The results support both the earnings signaling hypothesis and the attention directing hypothesis concerning stock split events.

Analisis Ratio Keuangan terhadap Perubahan Kinerja pada Perusahaan di Industri Food and Baverages yang Terdaftar pada BEJ

2005 ◽  
Vol 1 (2) ◽  
pp. 104
Author(s):  
DIAN MERIEWATY ◽  
ASTUTI YULI SEIYANI
Keyword(s):  
Stock Exchange ◽  
Financial Statements ◽  
Financial Statement ◽  
Financial Ratios ◽  
Future Earnings ◽  
Financial Condition ◽  
Total Capital ◽  
Future Earning ◽  
The Future ◽  
And Performance

Financial statements users need financial informotion of companies to analyze their financial condition and performance. Finacial rotios are useful rneasares for explaning the future earning changes. The study focuses on the usefulness of ftnancial ratios in explaning future eamings.The objective of the study is to empirically examine whether financial statement based tinancial ratios hove ability for explaning future earnings. Data in this study were in food and beverages firms listed on the Jaknrta Stock Exchange. Regression analysis were used in testing the ability financial ratios for explaning changes. The multicollinearity test shows that there is no assosiation between independent variables, indicating multieollinearity is not a seriaus problem. The heteroscedasticity test shows that voriances of disturbances are constant for all observation in independentt variables. Therefore heteroscedasticity is not a problem. The empiricolly result showed that, financial ratios in/luences the futureearnings changes for earning after tax are total debt to total capital assets, total assets turnover, and return on investment. Among those sevent financial ratios that are significant influences the future earnings changes for operating prortt is current ratio.Keywords : Financial Ratios, Performance changes of firms, significantlyinfluence.

Do investors anticipate the future earnings of firms in a homogeneous industry?

2019 ◽  
Vol 27 (5) ◽  
pp. 577-590
Author(s):  
Hyejeong Shin ◽  
Heejeong Shin ◽  
Su-In Kim
Keyword(s):  
Future Earnings ◽  
The Future
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