scholarly journals A Study on the Relationship between Analysts’ Cash Flow Forecasts Issuance and Accounting Information: Evidence from Korea

2019 ◽  
Vol 11 (12) ◽  
pp. 3399 ◽  
Author(s):  
Hyun Min Oh ◽  
Ho young Shin
Keyword(s):  
Cash Flow ◽  
Capital Market ◽  
Forecast Accuracy ◽  
Earnings Forecast ◽  
Financial Analyst ◽  
Market Participants ◽  
Cash Flow Forecasting ◽  
Cash Flow Forecasts ◽  
Cash Flow Forecast ◽  
The Relationship

This study analyzes the relationship between the future cash flow forecast information provided by financial analysts and accounting information. We examine whether the joint issuance of financial analyst earnings forecasts and cash flow forecasts from 2011 to 2015 contributes to the information usefulness of Korean listed firms. The empirical results of this study are as follows. First, the issuance of analysts’ cash flow forecasts and earnings forecast accuracy were significant positive values. Cash flow forecast accuracy and earnings forecast accuracy were significant positive values. Second, the issuance of analysts’ cash flow forecasts and buy–sell bid spread are significant negative values. These results show that the information asymmetry between the manager and the investor can be reduced based on the rich information environment. This study suggests that cash flow forecasting information of financial analysts provides important evidence for capital market participants because it provides evidence that capital market participants’ information can be used as useful information for economic decision-making. These results show the sustainability of a firm from the viewpoint of a financial analyst who acts as an intermediary and external supervisor in the capital market. In addition, the analysts’ cash flow forecasting information is expected to reduce the information asymmetry between the company and the investor, thereby increasing the transparency and sustainability of the firm.

scholarly journals The Informativeness Of Cash Flow Forecasts And The Regulation FD Environment

2011 ◽  
Vol 9 (6) ◽  
pp. 29
Author(s):  
Karin A. Petruska
Keyword(s):  
Cash Flow ◽  
Forecast Accuracy ◽  
Time Frame ◽  
Earnings Forecast ◽  
Forecast Errors ◽  
Prior Literature ◽  
Regulation Fd ◽  
Mere Existence ◽  
Cash Flow Forecasts ◽  
Cash Flow Forecast

Prior literature shows that analysts forecast estimates serve as a proxy for the markets and investors beliefs which are unobservable. For decades, analysts have generated forecasts for use in valuation models including future estimates of earnings and growth. Yet, only recently, analysts have begun to voluntarily provide cash flow per share forecasts at the same time they are producing earnings per share forecasts for firms they follow. This study addresses whether the tendency of analysts to issue cash flow per share forecasts, as a result of changes in the regulatory environment, affects forecast properties. By examining the time frame surrounding Regulation FD, the analysis provides evidence that both the mere existence and the relative measure of analysts cash flow per share forecasts differ in explaining analysts earnings forecast accuracy. Specifically, the empirical results demonstrate that the relative value of analysts cash flow forecasts, the implied value of unexpected accruals, and cash flow forecast errors facilitate the reduction in analysts earnings forecast errors subsequent to the passage of Regulation FD. Further, the inverse relation between these analysts inputs and earnings forecast errors appear to be driven by firms with more accurate cash flow forecasts.

scholarly journals Do Analysts’ Cash Flow Forecasts Improve Firm Value?

2020 ◽  
Vol 8 (4) ◽  
pp. 60
Author(s):  
Hyun Min Oh ◽  
Sam Bock Park ◽  
Jong Hyun Kim
Keyword(s):  
Cash Flow ◽  
Firm Value ◽  
Earnings Quality ◽  
Financial Analysts ◽  
Market Participants ◽  
Economic Decision Making ◽  
Cash Flow Forecasting ◽  
Cash Flow Forecasts ◽  
Positive Effect

We examine whether analysts’ cash flow forecasts improve firm value. First, we analyze whether the joint issuance of financial analysts’ earnings and cash flow forecasts improve firm value. Second, we analyze whether the quality of analysts’ cash flow forecasts improve firm value. The empirical results of our study are as follows. First, the joint issuance of analysts’ earnings and cash flow forecasts has a significantly positive effect on firm value; providing cash flow forecasts reduces information asymmetry and increases earnings quality, thereby increasing corporate value. Second, the quality of analysts’ cash flow forecasts has a significantly positive effect on firm value; the more accurate cash flow forecasts are, the higher firm value is. Our study provides empirical evidence for that the conclusion that cash flow forecasting information produced by financial analysts provides useful information for capital market participants in economic decision making.

Literature Review of Treasury Cash Flow Forecast

2020 ◽  
Vol 7 (9) ◽  
pp. 521-523
Author(s):  
Shi Hua
Keyword(s):  
Literature Review ◽  
Cash Flow ◽  
Early Stage ◽  
Practical Work ◽  
Forecasting Methods ◽  
Great Progress ◽  
Cash Flow Forecasting ◽  
Cash Flow Forecast ◽  
Flow Forecast

In this paper, the related literatures of treasury cash flow forecasting in the early stage are reviewed. By reviewing the related literatures, it is found that the treasury cash flow forecasting in China has made great progress, and various forecasting methods have been used in practical work, but there is still room for optimization in treasury cash flow forecasting. Suggestions for optimization are put forward.

The Effects of Financial Statement and Informational Complexity on Analysts’ Cash Flow Forecasts

2008 ◽  
Vol 83 (4) ◽  
pp. 915-956 ◽  
Author(s):  
Leslie Hodder ◽  
Patrick E. Hopkins ◽  
David A. Wood
Keyword(s):  
Cash Flow ◽  
Forecast Error ◽  
Cash Flows ◽  
Net Income ◽  
Indirect Approach ◽  
Operating Cash Flows ◽  
Cash Flow Forecasts ◽  
Statement Of Cash Flows ◽  
Mixed Pattern ◽  
Cash Flow Forecast

ABSTRACT: We characterize the operating-activities section of the indirect-approach statement of cash flows as backward because it presents reconciling adjustments in a way that is opposite from the intuitively appealing, future-oriented, Conceptual Framework definitions of assets, liabilities, and the accruals process. We propose that the reversed-accruals orientation required in the currently mandated indirect-approach statement of cash flows is unnecessarily complex, causing information-processing problems that result in increased cash flow forecast error and dispersion. We also predict that the mixed pattern (i.e., +/−, −/+) of operating cash flows and operating accruals reported by most companies impedes investors’ ability to learn the time-series properties of cash flows and accruals. We conduct a carefully controlled experiment and find that (1) cash flow forecasts have lower forecast error and dispersion when the indirect-approach statement of cash flows starts with operating cash flows and adds changes in accruals to arrive at net income and (2) cash flow forecasts have lower forecast error and dispersion when the cash flows and accruals are of the same sign (i.e., +/+, −/−); with the sign-based difference attenuated in the forward-oriented statement of cash flows. We also conduct a quasi-experiment to test our mixed-sign versus same-sign hypotheses using archival samples of publicly available I/B/E/S and Value Line cash flow forecasts. We find that the passively observed samples of cash flow forecasts exhibit a similar pattern of mixed-sign versus same-sign forecast error as documented in our experiment.

Analysts’ cash flow forecasts informativeness, financial distress and auditor quality

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Afroditi Papadaki ◽  
Olga-Chara Pavlopoulou-Lelaki
Keyword(s):  
Cash Flow ◽  
Financial Distress ◽  
Value Relevance ◽  
Earnings Forecasts ◽  
Forecast Horizon ◽  
Content Type ◽  
Auditor Quality ◽  
Distressed Firms ◽  
Cash Flow Forecasts ◽  
Cash Flow Forecast

Purpose The purpose of this study is to examine the sophistication (accuracy, bias, informativeness for changes in accruals) and market pricing of analysts’ cash flow forecasts for Eurozone listed firms and the effects of financial distress and auditor quality. Design/methodology/approach Accuracy/bias is investigated using analysts’ cash flow forecast errors. The naïve extrapolation model is used to examine the forecasts’ informativeness for working capital changes. A total return model is used to examine value-relevance. This study controls for the forecast horizon, using the Altman z-score and a BigN/industry specialization auditor indicator to proxy for distress and auditor quality, respectively. Findings Analysts efficiently adjust earnings forecasts for depreciation during cash flow forecast formation but fail to efficiently incorporate working capital changes. Findings indicate cash flow forecasts’ accuracy improves for distressed firms and firms of high auditor quality, attributed to analyst conservatism and accounting choices and more accurate earnings forecasts, respectively. Cash flow forecasts’ value-relevance increases for distressed firms, particularly those of high auditor quality and timely forecasts. Originality/value To the best of the authors’ knowledge, this study is the first to examine analysts’ cash flow forecasts taking into consideration financial distress and auditor quality, controlling for the analyst forecast horizon.

scholarly journals THE SYSTEM OF FORMATION AND EVALUATION OF THE INFORMATION OF CASH FLOWS

2006 ◽  
Vol 7 (4) ◽  
pp. 171-182 ◽  
Author(s):  
Jonas Mackevičius ◽  
Kastytis Senkus
Keyword(s):  
Cash Flow ◽  
Cash Flows ◽  
Financial Investment ◽  
Financial Condition ◽  
Time Out ◽  
Cash Flow Forecasting ◽  
Cash Flow Statement ◽  
Cash Flow Forecast ◽  
Principal Elements

A very urgent problem of formation of cash flows in conditions of the competitive market is considered in the present article. Cash flows are defined as the inflows and outflows of cash and cash equivalents, created within a certain period of time out of the operating, financial, investment and extraordinary activities of the company. Examples of cash flows out of the operating, financial and investment activities of the company are adduced. The system of formation and evaluation of the information about cash flows is created. Its principal elements are as follows: cash flow accounting, classification of cash flows, issuing of the cash flow statement, control and analysis of cash flows, cash flow forecasting. The methods of analysis of cash flows are created, i.e. the horizontal analysis of the cash flow statement; the vertical analysis of the cash flow statement; the analysis of financial ratios of the cash flow statement; preparation of the cash flow forecast. Practical application of the system of formation and evaluation of the information about cash flows would help the company managers to take various management decisions on evaluation of the company's financial condition and its activity results better, quicker and more precisely.

Analyst reaction to non-articulation between the balance sheet and the statement of cash flows

2019 ◽  
Vol 21 (1) ◽  
pp. 163-184
Author(s):  
Peter Frischmann ◽  
K.C. Lin ◽  
Dilin Wang
Keyword(s):  
Cash Flow ◽  
Balance Sheet ◽  
Cash Flows ◽  
Negative Influence ◽  
Financial Statement ◽  
Earnings Forecast ◽  
Content Type ◽  
Cash Flow Forecasts ◽  
Analyst Earnings ◽  
Statement Of Cash Flows

Purpose The purpose of this paper is to investigate the effect of non-articulation on analyst earnings forecast quality. The authors look for evidence on the relationship between non-articulation and analyst earnings forecast properties: forecast inaccuracy, forecast dispersion and forecast bias. Design/methodology/approach The empirical tests are primarily based analyst earnings and cash flow forecasts covered by Institutional Broker Estimate System and financial statement information obtained from Compustat North America database. Findings The authors hypothesize and find that non-articulation is positively related to analyst forecast dispersion, forecast accuracy and forecast bias for one-year ahead of earnings. The effects of non-articulation on analyst earnings forecast inaccuracy and bias are neutralized when the analyst issues a cash flow forecast and when such forecast provides accurate information regarding the forecasted firm’s operating cash flow. On the other hand, cash flow forecast issuance alone does not mitigate the negative influence of non-articulation. Research limitations/implications The sample selection procedure limits the generalizability of the findings. Practical implications The findings confirm CFA Institute and prior research asserting that non-articulation deteriorates the quality of earnings forecasts by financial statement users (more specifically, the financial analysts). The authors add to the literature by documenting that accurate cash flow forecasts help analysts mitigate the negative influence of non-articulation on earnings forecast quality. Originality/value It remains an empirical question whether non-articulation between the balance sheet and the statement of cash flows has an effect on financial statement users’ ability to assimilate financial information. The paper highlights the detrimental effect of non-articulation by documenting the relationship between the non-articulation and the quality of earnings expectation.

Sign in / Sign up

Export Citation Format

Share Document