International Diversification and Analysts' Forecast Accuracy and Bias

2002 ◽  
Vol 77 (2) ◽  
pp. 415-433 ◽  
Author(s):  
Augustine Duru ◽  
David M. Reeb
Keyword(s):  
Forecast Accuracy ◽  
Earnings Forecasts ◽  
International Diversification ◽  
Corporate International Diversification ◽  
Consensus Analysts

We investigate the association between corporate international diversification and the accuracy and bias of consensus analysts' earnings forecasts. We find that greater corporate international diversification is associated with less accurate and more optimistic forecasts. Our results suggest that international diversification reflects unique dimensions of forecasting difficulty that are not captured in previously identified determinants. This evidence suggests that as firms become more geographically diversified, forecasting their earnings becomes more complex.

Consensus analysts' earnings forecasts and security returns

1996 ◽  
Vol 13 (2) ◽  
pp. 101-110 ◽  
Author(s):  
Michael Aitken ◽  
Alex Frino ◽  
Roland Winn
Keyword(s):  
Earnings Forecasts ◽  
Security Returns ◽  
Consensus Analysts

Analysts’ Incentives to Overweight Management Guidance When Revising Their Short-Term Earnings Forecasts

2010 ◽  
Vol 85 (5) ◽  
pp. 1617-1646 ◽  
Author(s):  
Mei Feng ◽  
Sarah McVay
Keyword(s):  
Forecast Accuracy ◽  
Earnings Forecasts ◽  
Investment Banking ◽  
Equity Offerings ◽  
Short Term ◽  
Management Guidance ◽  
Banking Business

ABSTRACT: We document that, when revising their short-term earnings forecasts in response to management guidance, analysts wishing to curry favor with management weight the guidance more heavily than predicted, based on the credibility and usefulness of the guidance. This overweighting of guidance is present prior to equity offerings and other events that could lead to investment banking business. Although analysts sacrifice their forecast accuracy by overweighting management guidance, they appear to benefit, on average, by subsequently gaining the underwriting business for their banks. Thus, while analysts wishing to please managers are optimistic in their long-term earnings forecasts, they take their cue from management when determining their short-term earnings forecasts.

The Moderating Effect of Industry Concentration on the Relations Between External Attributes and the Properties of Analyst Earnings Forecast

2013 ◽  
Vol 16 (03) ◽  
pp. 1350019 ◽  
Author(s):  
Yu-Cheng Chen ◽  
Chiung-Yao Huang ◽  
Pei-I Chou
Keyword(s):  
Forecast Accuracy ◽  
Earnings Forecasts ◽  
Moderating Effect ◽  
Industry Concentration ◽  
Earnings Forecast ◽  
Moderating Effects ◽  
Forecast Dispersion ◽  
Earnings Surprise ◽  
Using Data ◽  
Analyst Earnings

Based on the work of earlier studies, the main objective of this study is to determine whether the properties of analyst earnings forecast are related to the interaction effects of external attributes and industry concentration that were not the focus of previous research. Specifically, this study examines the relations between external attributions and the properties of analyst earnings forecasts. Furthermore, we explore the moderating effect of industry concentration on the relations between external attributions and the properties of analyst earnings forecasts. Using data from Compustat and I/B/E/S, we provide evidence that analysts' earnings forecast accuracy is lower and the forecast dispersion is larger for firms with more earnings surprise. Firms with more analysts' forecasts covering are associated with higher forecast accuracy, but not necessarily higher forecast dispersion. The moderating effects of industry concentration on the relationships between earnings surprise, the number of estimates covering the company and forecast accuracy are particularly strong. In addition, the moderating effects of industry concentration on the relationship between earnings surprise, the number of estimates covering the company and the forecast dispersion are partially supported. Overall, the industrial concentration factor either magnifies or alleviates the effect of external attributions on analyst's forecast accuracy and forecast dispersion.

Gender-Diverse Boards and Properties of Analyst Earnings Forecasts

2013 ◽  
Vol 27 (3) ◽  
pp. 511-538 ◽  
Author(s):  
Ferdinand A. Gul ◽  
Marion Hutchinson ◽  
Karen M. Y. Lai
Keyword(s):  
Stock Price ◽  
Audit Quality ◽  
Gender Diversity ◽  
Forecast Accuracy ◽  
Earnings Forecasts ◽  
Corporate Boards ◽  
Price Informativeness ◽  
Board Diversity ◽  
Financial Reports ◽  
Quality Stock

SYNOPSIS Using a sample of 2,200 U.S. listed firm-year observations (2001–2007), this study shows a positive (negative) relation between gender diversity on corporate boards and analysts' earnings forecast accuracy (dispersion), after controlling for earnings quality, corporate governance, audit quality, stock price informativeness, and potential endogeneity. Our findings are important as they suggest that board diversity adds to the transparency and accuracy of financial reports such that earnings expectations are likely to be more accurate for these firms.

scholarly journals Earnings Forecast Optimism For U.S. Vs. Non-U.S. Firms

2013 ◽  
Vol 12 (11) ◽  
pp. 1491
Author(s):  
David Salerno ◽  
Nathan Jeppson
Keyword(s):  
Task Complexity ◽  
Financial Analysts ◽  
Forecast Accuracy ◽  
Earnings Forecasts ◽  
International Investment ◽  
Growth Potential ◽  
Earnings Forecast ◽  
Level Measurement ◽  
Investment Opportunities

This study examines whether financial analysts are more optimistic in their earnings forecasts for non-U.S. firms than they are for U.S. firms. Several areas of research motivate this examination. First, research shows that global economic influences, such as economic downturns and the desire to increase the international content of portfolios, encourage investors to seek out international investment opportunities in new markets. Second, literature also reveals that emerging markets provide superior growth potential; however, analyzing such firms could introduce task complexity which research finds to be associated with lower forecast accuracy. Finally, research shows that financial analysts cover firms of which they have a favorable opinion. Therefore, because of this literature, it is reasonable to expect that analysts make more optimistic forecasts (over-estimate errors) of the earnings potential of the non-U.S. firms that they choose to follow vs. U.S. firms. Using a summary level measurement of forecast optimism, the authors find that analysts forecasts are more optimistic for non-U.S. firms over both short and long-term horizons. In analyst-level tests, it was found that individual analysts produce more optimistic forecasts for non-U.S. firms in relation to their peers in the long-term; however, that optimism is reduced under short horizons. As portfolios become more internationally diversified, the result of this study will be useful to investors seeking analyst guidance about international investment opportunities.

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