Meeting Individual Analyst Expectations

2014 ◽  
Vol 89 (6) ◽  
pp. 2203-2231 ◽  
Author(s):  
Marcus P. Kirk ◽  
David A. Reppenhagen ◽  
Jennifer Wu Tucker
Keyword(s):  
Private Information ◽  
Explanatory Power ◽  
Analyst Forecasts ◽  
Data Availability ◽  
Analyst Forecast ◽  
Analyst Expectations ◽  
Management Literature ◽  
Two Measures ◽  
Reported Earnings

ABSTRACT The expectations management literature has so far focused on firms meeting the analyst consensus forecast—the expectations of analysts as a group—at earnings announcements. In this study we argue that investors may use individual analyst forecasts as additional benchmarks in evaluating reported earnings because the consensus forecast underutilizes private information contained in individual analyst forecasts. We predict that measures reflecting such private information have incremental explanatory power over the consensus forecast for the market's reaction to earnings news. We find results consistent with this prediction by examining two measures: (1) the percentage of individual forecasts met and (2) meeting the key analyst forecast. We extend the literature by documenting the role of individual analyst forecasts in investors' evaluations of reported earnings. JEL Classifications: G10; G11; G17; G14; G24. Data Availability: Data are publicly available from the sources identified in the paper.

scholarly journals Earnings Smoothing as Information Signaling or Garbling: A Review of Literature

2018 ◽  
Vol 10 (1) ◽  
pp. 131
Author(s):  
Nor Afifah Shabani ◽  
Saudah Sofian
Keyword(s):  
Private Information ◽  
Firm Value ◽  
Future Research ◽  
Journal Articles ◽  
Actual Performance ◽  
Future Earnings ◽  
Information Signaling ◽  
Earnings Smoothing ◽  
Reported Earnings

Earnings smoothing, which refers to the action of managers managing earnings to reduce fluctuations of reported earnings, is a special type of earnings management because while earnings smoothing may be used to distort shareholders and creditors’ view of corporate actual performance, it may also serve as a tool to communicate corporate private information of future earnings to the aforementioned stakeholders. Hence, it comes to no surprise when prior literatures reveal that the studies on the role of earnings smoothing are divided into two streams: as information signaling and information garbling. This paper aims to review prior literatures, specifically on the role of earnings smoothing either as information signaling or garbling based on four themes: firm value, financing need, compensation contract and outsiders’ intervention. This paper reviews journal articles gathered from Web of Science database. Based on the shortcomings of prior literatures, this paper highlights avenue for future research.

scholarly journals Earnings Predictability And Broker-Analysts’ Earnings Forecast Bias

2017 ◽  
Vol 33 (6) ◽  
pp. 1285-1302
Author(s):  
Michael Eames ◽  
Steven Glover
Keyword(s):  
Private Information ◽  
Alternative Model ◽  
Analyst Forecast ◽  
Earnings Forecast ◽  
Earnings Expectations ◽  
Forecast Bias ◽  
Analyst Expectations ◽  
Earnings Predictability ◽  
Using Data ◽  
Short Horizon

Scholars have reasoned that analysts issue optimistic forecasts to improve their access to managers’ private information when earnings are unpredictable. While this requires a managerial preference for analyst forecast optimism, the observed walk-down of analyst expectations to beatable forecasts is consistent with a managerial preference for pessimism in short-horizon forecasts. Using data from various sample periods, alternative model specifications, and various measures of earnings unpredictability, we find that pessimism, not optimism, in short-horizon forecasts is associated with increasingly unpredictable earnings. Our results suggest that firms can more effectively manage analysts’ earnings expectations downward when earnings are relatively unpredictable.

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

2015 ◽  
Vol 35 (2) ◽  
pp. 167-185 ◽  
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.

scholarly journals The effect of institutional ownership on the reporting of conservative earnings

2007 ◽  
Vol 4 (4) ◽  
pp. 338-344
Author(s):  
Uma Velury ◽  
David S. Jenkins
Keyword(s):  
Financial Reporting ◽  
Private Information ◽  
Institutional Ownership ◽  
Stock Market Crash ◽  
Asymmetric Timeliness ◽  
Institutional Holdings ◽  
Sarbanes Oxley ◽  
Institutional Monitoring ◽  
Reported Earnings

Given the spate of financial reporting scandals and enactment of the Sarbanes-Oxley Act of 2002 following the stock market crash of 1999, we examine the role of institutional monitoring as it pertains to reporting conservatism. Using the Basu (1997) asymmetric timeliness models, we examine the relation between institutional ownership and the conservatism of reported earnings, as defined by the asymmetric timeliness measures. Our results indicate that larger institutional holdings are associated with a decrease in earnings conservatism. We attribute these findings in part to the incentives of large institutional investors to capitalize on private information obtained through their role as corporate monitors. As such, it may be unlikely that large investors would not encourage the timely reporting of bad news

The Interactive Role of Difficulty and Incentives in Explaining the Annual Earnings Forecast Walkdown

2016 ◽  
Vol 91 (4) ◽  
pp. 995-1021 ◽  
Author(s):  
Mark T. Bradshaw ◽  
Lian Fen Lee ◽  
Kyle Peterson
Keyword(s):  
Interactive Effect ◽  
Earnings Forecasts ◽  
Data Availability ◽  
Analyst Forecast ◽  
Earnings Forecast ◽  
Regression Analyses ◽  
Strategic Incentives ◽  
Psychology Literature ◽  
Annual Earnings

ABSTRACT The within-year walkdown of analysts' earnings forecasts has largely been attributed to analysts' incentives to curry favor with managers. We appeal to cognitive psychology literature on motivated reasoning and propose that forecasting difficulty interacts with such incentives to yield the observed walkdown. Higher forecasting difficulty generates a wider range of outcomes from which analysts can justify optimistically biased forecasts. In regression analyses, we find that the interaction between analysts' incentives for optimism and difficulty exhibits the strongest effect on earnings walkdowns. We also examine revenue forecasts as a benchmark of lower forecasting difficulty and find that revenue walkdowns are relatively diminutive. However, when analysts forecast losses, revenue forecasts are more critical and exhibit markedly steeper walkdowns. Our results suggest that analyst forecast walkdowns are better characterized by an interactive effect between analysts' strategic incentives for optimism and forecasting difficulty. JEL Classifications: G17; M41. Data Availability: Data are available from public sources identified in the text.

Science and Dialectics in the Philosophies of Deleuze, Bachelard and DeLanda

Paragraph ◽  
2006 ◽  
Vol 29 (2) ◽  
pp. 98-114 ◽  
Author(s):  
James Williams
Keyword(s):  
Gilles Deleuze ◽  
Explanatory Power ◽  
Scientific Theories ◽  
Gaston Bachelard ◽  
Contemporary Science

This article charts differences between Gilles Deleuze's and Gaston Bachelard's philosophies of science in order to reflect on different readings of the role of science in Deleuze's philosophy, in particular in relation to Manuel DeLanda's interpretation of Deleuze's work. The questions considered are: Why do Gilles Deleuze and Gaston Bachelard develop radically different philosophical dialectics in relation to science? What is the significance of this difference for current approaches to Deleuze and science, most notably as developed by Manuel DeLanda? It is argued that, despite its great explanatory power, DeLanda's association of Deleuze with a particular set of contemporary scientific theories does not allow for the ontological openness and for the metaphysical sources of Deleuze's work. The argument turns on whether terms such as ‘intensity’ can be given predominantly scientific definitions or whether metaphysical definitions are more consistent with a sceptical relation of philosophy to contemporary science.

Do Targets Benefit From Auctions? The Role of Private Information

2012 ◽  
Author(s):  
Carol Anilowski Cain ◽  
Antonio J. Macias ◽  
Juan Manuel Sanchez
Keyword(s):  
Private Information

Language Ideology and Second Language Learning

2008 ◽  
Vol 155 ◽  
pp. 95-115 ◽  
Author(s):  
Theresa McGarry
Keyword(s):  
Second Language ◽  
Second Language Acquisition ◽  
Language Acquisition ◽  
Language Learning ◽  
Language Ideology ◽  
Second Language Learning ◽  
Classroom Practices ◽  
Explanatory Power

AbstractThe increasing recognition of the concept language ideology and the corresponding increasing use of the term have not yet been matched by applications in the field of second language acquisition. However, applications of the concept in analysis of actual classroom practices have shown it to have considerable explanatory power. Greater consideration of language ideology in SLA is necessary not only to achieve greater understanding of the role of ideology in various areas but also to show connections between these areas that may yield important generalizations and to impel the application of the concept in areas where it has been neglected by highlighting its uneven treatment.

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