The Settling-up Effect of Quarterly Earnings and Bias and Accuracy of Analysts’ Earnings Forecasts

2017 ◽  
Vol 42 (5) ◽  
pp. 91-122
Author(s):  
Wonsun Paek
Keyword(s):  
Earnings Forecasts ◽  
Quarterly Earnings ◽  
Settling Up

Restatement Disclosures and Management Earnings Forecasts

2013 ◽  
Vol 27 (2) ◽  
pp. 347-369 ◽  
Author(s):  
Michael Ettredge ◽  
Ying Huang ◽  
Weining Zhang
Keyword(s):  
Voluntary Disclosure ◽  
Earnings Forecasts ◽  
Management Earnings Forecasts ◽  
Quarterly Earnings ◽  
Financial Restatements ◽  
The Impact ◽  
Information Providers

SYNOPSIS We examine the impact of financial restatements on managers' subsequent earnings forecasts. We argue that restatements create conflicting incentives. One incentive is to repair manager reputations as information providers by providing more and better guidance via earnings forecasts. The opposing incentive is to avoid risk by reducing the information in forecasts. We find that compared to control firms, restatement companies exhibit a decreased propensity to issue quarterly earnings forecasts following restatements. Those that do make forecasts issue fewer forecasts in post-restatement periods. We also find that post-restatement forecasts are less precise, and are less optimistically biased. Overall, our results suggest that, rather than increasing voluntary disclosure in the form of forecasts, managers of restatement companies exhibit risk-averting forecasting behavior following restatements.

Does an Analyst's Access to Information Vary with the Favorableness of Their Language When Speaking to Management?

2017 ◽  
Vol 31 (4) ◽  
pp. 13-31 ◽  
Author(s):  
Jonathan A. Milian ◽  
Antoinette L. Smith ◽  
Elio Alfonso
Keyword(s):  
Earnings Forecasts ◽  
Earnings Forecast ◽  
Access To Information ◽  
Positive Relation ◽  
Conference Calls ◽  
Large Sample ◽  
Quarterly Earnings ◽  
Similar Relation ◽  
General Experience ◽  
Brokerage Firms

SYNOPSIS We examine whether analysts who use more favorable language during earnings conference calls subsequently issue more accurate earnings forecasts. Using a large sample of earnings conference calls from the 2004–2013 period for S&P 500 firms, we find a significantly positive relation between an analyst's tone during a firm's call and the accuracy of the analyst's next quarterly earnings forecast for that firm. We find a similar relation for analysts who praise a firm's management during the call. Our findings are consistent with the favorableness of an analyst's language reflecting their access to a firm's management. In additional analyses, we find that female analysts, analysts with less general experience, analysts at smaller brokerage firms, and analysts who cover more industries, on average, use significantly more favorable language during earnings conference calls. Overall, we contribute a new proxy, incremental to other proxies, for the analyst-manager relationship.

Evidence on the Superiority of Analysts Quarterly Earnings Forecasts for Small Capitalization Firms

1995 ◽  
Vol 26 (2) ◽  
pp. 243-263 ◽  
Author(s):  
Bruce C. Branson ◽  
Kenneth S. Lorek ◽  
Donald P. Pagach
Keyword(s):  
Earnings Forecasts ◽  
Quarterly Earnings

scholarly journals Information in the Tails of the Distribution of Analysts’ Quarterly Earnings Forecasts

2016 ◽  
Vol 72 (5) ◽  
pp. 84-99 ◽  
Author(s):  
Cameron Truong ◽  
Philip B. Shane ◽  
Qiuhong Zhao
Keyword(s):  
Earnings Forecasts ◽  
Quarterly Earnings

scholarly journals Does the Equity Market Reward “Superior” Management Earnings Forecast? Evidence from the U.S. Quarterly Earnings Guidance

2021 ◽  
Vol 16 (3) ◽  
pp. 1-30
Author(s):  
Tina Wang ◽  
Keyword(s):  
Capital Market ◽  
Stock Price ◽  
Accounting Information ◽  
Price Volatility ◽  
Earnings Forecasts ◽  
Equity Market ◽  
Equity Capital ◽  
Earnings Guidance ◽  
Short Term ◽  
Quarterly Earnings

This paper examines whether equity markets reward the controversial practice of issuing short-term management earnings forecasts. Using a large sample of quarterly earnings forecasts, this research found that firms may temporarily reduce stock price volatility by issuing quarterly earnings forecasts. Furthermore, the analysis showed that not all guidance issuers are equally rewarded by equity capital markets. The benefits of reduced stock price volatility and favorable market valuation primarily accrue to firms with a track record of supplying accurate and timely short-term earnings forecasts. Findings suggest that superior short-term earnings guidance, which fosters transparent financial information environments and reduces investor information uncertainty, is indeed rewarded by equity capital markets. As limited research examines the association between forecast attributes and the capital market consequences of quarterly earnings guidance, this study aimed to provide empirical evidence on equity capital market rewards by issuing high-quality quarterly earnings guidance. A practical implication is that firms need to invest in accounting information systems and accounting talent in order to achieve capital market benefits of supplying high-quality short-term earnings forecasts. Keywords: quarterly earnings guidance, forecast attributes, accounting information system, equity market rewards, United States

The Perils of Pensions: Does Pension Accounting Lead Investors and Analysts Astray?

2006 ◽  
Vol 81 (4) ◽  
pp. 925-955 ◽  
Author(s):  
Marc Picconi
Keyword(s):  
Balance Sheet ◽  
Earnings Forecasts ◽  
Pension Plan ◽  
Pension Accounting ◽  
Significant Information ◽  
Future Earnings ◽  
Quarterly Earnings ◽  
Future Performance ◽  
Long Run ◽  
Funded Status

This paper explores the ability of investors and analysts to fully process available pension information when establishing prices and making earnings forecasts. I find that neither prices nor forecasts fully reflect the quantifiable future earnings effects of changes in pension information at the time it becomes publicly available in the firm's 10-K. Instead, the evidence suggests that investors and analysts only gradually incorporate this information into prices and forecasts as they observe the effects of the pension plan changes on subsequent quarterly earnings. The persistent tardiness of analysts to incorporate this relevant and economically significant information about earnings is surprising given that they are provided with pension information on a repeated and timely basis. Additionally, I find that the off-balance-sheet portion of the pension plan's funded status and the PBO are predictive of future returns while the on-balance-sheet portion of the funded status is not. This implies that investors do not accurately assess the long-run cash flow and earnings implications of these off-balance-sheet pension disclosures. The compensation rate is also predictive of future returns suggesting that it signals management's expectation of future performance.

Analysts’ forecasts between last consensus and earning announcement date

2020 ◽  
Vol 18 (4) ◽  
pp. 779-793
Author(s):  
Weiqi Zhang ◽  
Huong Ha ◽  
Hui Ting Evelyn Gay
Keyword(s):  
Design Methodology ◽  
Statistical Tests ◽  
Earnings Forecasts ◽  
Descriptive Statistics ◽  
Earning Announcement ◽  
Earnings Announcement ◽  
Content Type ◽  
Quarterly Earnings ◽  
Announcement Date ◽  
Consensus Measure

Purpose Thomson financial database reports a monthly consensus measure of analysts’ forecasts in the third week of every month, and firms’ earnings announcement dates are usually different from the last consensus calculation date. Thus, there is a gap between the last consensus calculation date and the earnings announcement date of firms. This study aims to address the question: “Do analysts issue forecasts that are slightly higher than the consensus number to increase the accuracy of their forecasts?” Design/methodology/approach This study is based on a sample of 91,172 quarterly earnings forecasts of various firms from 1990 to 2007 made between the last consensus calculation date and quarterly earnings announcement date. Descriptive statistics and statistical tests were used to analyze the data. Findings The findings propose that contrary to expectation, analysts’ forecasts between the last consensus calculation date and earnings announcement date are smaller than the consensus number. Also, the forecasts made between the last consensus and earnings announcement date is not as informative as forecasts made at other times as they could merely reflect the analysts’ herding behavior resulting from their career concerns. Originality/value This study provides a link between the literature that studies firms’ meet or beat analysts’ earnings phenomenon and analysts’ forecast decision-making context. This study also provides useful implications for the literature on the information content of analysts’ forecasts.

Analyst Conflicts and Research Quality

2012 ◽  
Vol 02 (02) ◽  
pp. 1250010 ◽  
Author(s):  
Anup Agrawal ◽  
Mark A. Chen
Keyword(s):  
Conflicts Of Interest ◽  
Earnings Forecasts ◽  
Research Quality ◽  
Firm Resources ◽  
Forecast Revisions ◽  
Quarterly Earnings ◽  
Earnings Per Share ◽  
Stock Analysts

This paper examines whether the quality of stock analysts' forecasts is related to conflicts of interest from their employers' investment banking (IB) and brokerage businesses. We consider four aspects of forecast quality: accuracy, bias, and revision frequency of quarterly earnings per share (EPS) forecasts and relative optimism in long-term earnings growth (LTG) forecasts. Using a unique dataset that contains the annual revenue breakdown of analysts' employers among IB, brokerage, and other businesses, we uncover two main findings. First, accuracy and bias in quarterly EPS forecasts appear to be unrelated to conflict magnitudes after controlling for forecast age, firm resources, and analyst characteristics. Second, relative optimism in LTG forecasts and the revision frequency of quarterly EPS forecasts are positively related to the importance of brokerage business to analysts' employers. Additional tests suggest that the frequency of quarterly forecast revisions is positively related to analysts' trade generation incentives. Our findings suggest that reputation concerns keep analysts honest with respect to short-term earnings forecasts but not LTG forecasts. In addition, conflicts from brokerage appear to play a more important role in shaping analysts' forecasting behavior than has been previously recognized.

scholarly journals The Impact Of Options Listing Upon The Optimistic Bias In Analysts Quarterly Earnings Forecasts

2011 ◽  
Vol 11 (4) ◽  
pp. 73
Author(s):  
David L. Senteney ◽  
Andrew G. Snyir
Keyword(s):  
Earnings Forecasts ◽  
Optimistic Bias ◽  
Quarterly Earnings ◽  
The Impact ◽  
Insight Into ◽  
Consensus Analysts

We provide evidence that firms options listing increases the divergence of analysts opinions and, at the same time, leads to a reduction in the systematic optimistic bias in an important element of the market expectation of earnings, analysts consensus earnings forecasts. Our contribution is added insight into how the increased divergence of analysts opinions following options listing drives a reduction of systematic optimistic bias in consensus analysts forecasts.

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