The Influence of Corporate Risk Exposures on the Accuracy of Earnings Forecasts PDF Download
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Author: Wayne R. Guay Publisher: ISBN: Category : Languages : en Pages : 46
Book Description
We examine how corporations' exposures to interest rates, exchange rates, and commodity prices are related to investors' and analysts' expectations about firms' earnings. The results indicate that investors and analysts encounter difficulties estimating the earnings effects of the risk exposures that companies face. Stock returns around earnings announcements are associated with the magnitude of both recent quarter and lagged shocks to interest rates, exchange rates and commodity prices, especially for firms with large ex-ante exposures to these risks. Further, although intra-quarter revisions to analysts' forecasts do incorporate information about the earnings effects of the risk shocks, analysts' earnings forecasts do not fully resolve the uncertainty created by recent quarter and lagged shocks. Overall, the results suggest that analysts resolve between 28% and 56% of the total uncertainty created by interest rate, exchange rate, and commodity price shocks (the percentage reduction depends on the types and magnitudes of a given firm's exposures). The results are consistent with arguments that corporate financial risk exposures are not transparent to investors or analysts, and support recent research arguing that firms' hedging strategies consider this source of earnings uncertainty.
Author: Wayne R. Guay Publisher: ISBN: Category : Languages : en Pages : 46
Book Description
We examine how corporations' exposures to interest rates, exchange rates, and commodity prices are related to investors' and analysts' expectations about firms' earnings. The results indicate that investors and analysts encounter difficulties estimating the earnings effects of the risk exposures that companies face. Stock returns around earnings announcements are associated with the magnitude of both recent quarter and lagged shocks to interest rates, exchange rates and commodity prices, especially for firms with large ex-ante exposures to these risks. Further, although intra-quarter revisions to analysts' forecasts do incorporate information about the earnings effects of the risk shocks, analysts' earnings forecasts do not fully resolve the uncertainty created by recent quarter and lagged shocks. Overall, the results suggest that analysts resolve between 28% and 56% of the total uncertainty created by interest rate, exchange rate, and commodity price shocks (the percentage reduction depends on the types and magnitudes of a given firm's exposures). The results are consistent with arguments that corporate financial risk exposures are not transparent to investors or analysts, and support recent research arguing that firms' hedging strategies consider this source of earnings uncertainty.
Author: Paul A. Wong Publisher: ISBN: Category : Languages : en Pages : 49
Book Description
Analysts are motivated to fulfill client demand for information, and institutional investors are sell-side analysts' most important clients. Following time allocation theory, analysts likely prioritize tasks and the firms they follow to maximize their overall utility. I posit analysts issue more accurate and informative earnings forecasts for firms that provide greater expected utility to the analyst. Using the firm's exposure to institutional investors, as a measure of expected utility, I find that analysts report more accurate forecasts for firms with greater exposure to institutional investors. In addition, I find evidence that analysts issue more informative earnings forecasts for firms with greater exposure to institutions that rely on private information, specifically institutions with transient investment strategies. These findings suggest that analysts allocate greater forecasting resources to firms with more exposure to priority clients and issue more informative and accurate forecasts for these firms.
Author: El Bachir Boukherouaa Publisher: International Monetary Fund ISBN: 1589063953 Category : Business & Economics Languages : en Pages : 35
Book Description
This paper discusses the impact of the rapid adoption of artificial intelligence (AI) and machine learning (ML) in the financial sector. It highlights the benefits these technologies bring in terms of financial deepening and efficiency, while raising concerns about its potential in widening the digital divide between advanced and developing economies. The paper advances the discussion on the impact of this technology by distilling and categorizing the unique risks that it could pose to the integrity and stability of the financial system, policy challenges, and potential regulatory approaches. The evolving nature of this technology and its application in finance means that the full extent of its strengths and weaknesses is yet to be fully understood. Given the risk of unexpected pitfalls, countries will need to strengthen prudential oversight.
Author: Sharjil M. Haque Publisher: International Monetary Fund ISBN: 1589064127 Category : Business & Economics Languages : en Pages : 51
Book Description
We study the impact of the COVID-19 recession on capital structure of publicly listed U.S. firms. Our estimates suggest leverage (Net Debt/Asset) decreased by 5.3 percentage points from the pre-shock mean of 19.6 percent, while debt maturity increased moderately. This de-leveraging effect is stronger for firms exposed to significant rollover risk, while firms whose businesses were most vulnerable to social distancing did not reduce leverage. We rationalize our evidence through a structural model of firm value that shows lower expected growth rate and higher volatility of cash flows following COVID-19 reduced optimal levels of corporate leverage. Model-implied optimal leverage indicates firms which did not de-lever became over-leveraged. We find default probability deteriorates most in large, over-leveraged firms and those that were stressed pre-COVID. Additional stress tests predict value of these firms will be less than one standard deviation away from default if cash flows decline by 20 percent.
Author: Wayne R. Guay
Author: Wayne R. Guay
Author: Wayne Guay
Author: Suzanne M. Luttman
Author: Paul A. Wong
Author: Ziad Khalil Al-Rai
Author: 
Author: American Accounting Association. Annual Meeting
Author: Group of Ten. Committee on Payment and Settlement Systems
Author: El Bachir Boukherouaa
Author: Sharjil M. Haque