Nonfinancial Disclosure and Analyst Forecast Accuracy PDF Download

Author: Dan S. Dhaliwal
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

View

Book Description
We examine the relationship between disclosure of nonfinancial information and analyst forecast accuracy using firm-level data from 31 countries. We use the issuance of standalone corporate social responsibility (CSR) reports to proxy for disclosure of nonfinancial information. We find that the issuance of standalone CSR reports is associated with lower analyst forecast error. This relationship is stronger in countries that are more stakeholder-oriented -- i.e., in countries where CSR performance is more likely to affect firm financial performance. The relationship is also stronger for firms and countries with more opaque financial disclosure, suggesting that issuance of standalone CSR reports plays a role complementary to financial disclosure. These results hold after we control for various factors related to firm financial transparency and other potentially confounding institutional factors. Collectively, our findings have important implications for academics and practitioners in understanding the function of CSR disclosure in financial markets.

Author: Lorenzo Dal Maso
Publisher:
ISBN:
Category :
Languages : en
Pages : 50

View

Book Description
We examine the association with analyst forecast quality of both CO2 emission disclosure and corporate social reporting for a sample of large US firms. Using a matched sample we find, for a one, two and three-year horizons, a significant reduction in error, bias and forecast dispersion and a significant improvement of the analysts' information environment for those firms that disclose CO2 emissions. However, we confirm a significant negative association between corporate social responsibility reporting and forecast error only for a one-year horizon and bias for a one and two-year horizon. Previous work had demonstrated a significant negative association between forecast error and CSR disclosure for an international sample but not for the US. Our results suggest nonfinancial disclosure is relevant even in a liberal market economy with transparent financial reporting. #

Author: Michelle Hutchens
Publisher:
ISBN:
Category :
Languages : en
Pages :

View

Book Description
This study provides new evidence about how tax footnote disclosure characteristics can alleviate errors in analyst forecasts of a firm's effective tax rate (ETR). Despite the importance of income taxes to a firm's bottom line, prior studies indicate that analysts and investors do not fully grasp the complexities of income taxes. Additionally, the FASB is interested in improving the effectiveness of financial statement footnotes and is evaluating the income tax footnote as part of the Disclosure Framework Project. I find that disclosures containing more quantitative information, less jargon, fewer complex words, and/or less legal terminology alleviate analysts' ETR forecast errors related to complexity in income tax accounting. Collectively, my findings provide evidence regarding the areas of accounting for income taxes that make forecasting ETRs difficult and the disclosure characteristics that aid analysts' understanding of tax information and thereby improve their ETR forecasts.

Author: Jahidur Md Rahman
Publisher:
ISBN:
Category :
Languages : en
Pages : 18

View

Book Description
This study conducts a comprehensive review of the literature published during 1996- 2017 to identify the factors that affect the accuracy of financial analysts' forecasts. We organize our review around three main groups, namely, (a) drivers of analyst forecast accuracy, (b) quality financial reporting, and (c) accounting standards. Among the several factors found, some factors (experience of the analyst, earnings quality, audit quality, IFRS adoption, and annual report readability) have a positive relationship with the accuracy of analysts' forecasts while others (politically connected firms, firms audited by Non-Big 4, and international GAAP differences) have a negative relationship. Our findings contribute to future research by examining the factors affecting analyst forecast accuracy from different perspectives, which will prove to be useful for academicians, regulators, investors, and financial analysts.

Author: Craig Nichols
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

View

Book Description
Regulation FD recommends press releases as a primary avenue for timely disclosure of material information to market participants. Firms commonly issue product-related and business expansion information through press releases, yet no study examines how analysts respond to these information events. We find that forecasting activity nearly doubles at the disclosure date, and that forecasts associated with these disclosures become more accurate and less dispersed across analysts. Finally, in short windows around the disclosure date, the market's reaction is concentrated at the date of the subsequent forecast revision. Overall, our results suggest that nonfinancial disclosures improve the quality and quantity of information in capital markets and appear to enhance the value of analysts' services, even though the information is made widely available to all market participants at the time the firm makes the disclosure.

Author: Sami Keskek
Publisher:
ISBN:
Category :
Languages : en
Pages : 48

View

Book Description
We posit and find an effect of disclosure and analyst reporting regulations implemented from 2000 through 2003 (including Regulation Fair Disclosure, the Sarbanes-Oxley Act, and the Global Settlement Act) on the importance of analyst and forecast characteristics for analyst forecast accuracy. Following the enactment of these regulations, more experienced analysts and All-Star analysts do not maintain their superior forecast accuracy, and analysts employed by large brokerage houses perform worse than other analysts. In addition, we find a decrease in the importance of analyst effort, the number of industries and firms followed, days elapsed since the last forecast, and forecast horizon. While the importance of bold upward forecast revisions does not change, bold downward revisions lose their relevance for forecast accuracy after 2003. Finally, we find an increase in the important of prior forecast accuracy. We find that the importance of these characteristics varies with the precision of publicly available information. Specifically, the decrease in the importance of most analyst and forecast characteristics and the increase in the importance of prior forecast accuracy are greater when the precision of publicly available information is low. Overall, our results suggest that the positive effects of experience, effort, brokerage house size, and All-Star status on forecast accuracy in the pre-regulation period were because of the information advantages that these analysts enjoyed (rather than their ability to generate private information). In contrast, our results suggest that prior forecast accuracy is related to analysts' ability to generate private information.

Author: Tanja Klettke
Publisher: Springer Science & Business
ISBN: 3658056347
Category : Business & Economics
Languages : en
Pages : 120

View

Book Description
Financial analysts provide information in their research reports and thereby help forming expectations of a firm’s future business performance. Thus, it is essential to recognize analysts who provide the most precise forecasts and the accounting literature identifies characteristics that help finding the most accurate analysts. Tanja Klettke detects new relationships and identifies two new determinants of earnings forecast accuracy. These new determinants are an analyst’s “general forecast effort” and the “number of supplementary forecasts”. Within two comprehensive empirical investigations she proves these measures’ power to explain accuracy differences. Tanja Klettke’s research helps investors and researchers to identify more accurate earnings forecasts.

Author: Sundaresh Ramnath
Publisher: Now Publishers Inc
ISBN: 1601981627
Category : Business & Economics
Languages : en
Pages : 125

View

Book Description
Financial Analysts' Forecasts and Stock Recommendations reviews research related to the role of financial analysts in the allocation of resources in capital markets. The authors provide an organized look at the literature, with particular attention to important questions that remain open for further research. They focus research related to analysts' decision processes and the usefulness of their forecasts and stock recommendations. Some of the major surveys were published in the early 1990's and since then no less than 250 papers related to financial analysts have appeared in the nine major research journals that we used to launch our review of the literature. The research has evolved from descriptions of the statistical properties of analysts' forecasts to investigations of the incentives and decision processes that give rise to those properties. However, in spite of this broader focus, much of analysts' decision processes and the market's mechanism of drawing a useful consensus from the combination of individual analysts' decisions remain hidden in a black box. What do we know about the relevant valuation metrics and the mechanism by which analysts and investors translate forecasts into present equity values? What do we know about the heuristics relied upon by analysts and the market and the appropriateness of their use? Financial Analysts' Forecasts and Stock Recommendations examines these and other questions and concludes by highlighting area for future research.

Author: Binod Guragai
Publisher:
ISBN:
Category : Business enterprises
Languages : en
Pages : 108

View

Book Description
Because of the non-recurring and transitory nature of discontinued operations, accounting standards require that the results of discontinued operations be separately reported on the income statement. Prior accounting literature supports the view that discontinued operations are non-recurring or transitory in nature, and also suggests that income classified as transitory has minimal relevance in firm valuation. Finance and management literature, however, suggest that firms discontinue operations to strategically utilize their scarce resources. Assuming that discontinued operations are a result of managerial motives to strategically concentrate resources into remaining continued operations, this dissertation examines the informativeness of discontinued operations. In doing so, this dissertation empirically tests the financial performance, investment efficiency, valuation, and analyst forecast accuracy effects of discontinued operations. In 2001, Financial Accounting Standards Board's (FASB) Statement of Financial Accounting Standards (SFAS) 144 (hereafter SFAS 144) replaced Accounting Principles Board's Opinion 30 (hereafter APB 30) and broadened the scope of divestiture transactions to be presented in discontinued operations. Some stakeholders of financial statements argued that discontinued operations were less decision-useful in the SFAS 144 era because too many transactions that do not represent a strategic shift in operations were separately stated as discontinued operations on the income statement. With the possibility that the discontinued operations reported in SFAS 144 era may not reflect a major strategic reallocation of resources, this dissertation examines whether the relationship between discontinued operations, firm performance, investment efficiency, and analyst forecast accuracy are different in the pre-SFAS 144 and SFAS 144 era. Using a sample of firms that discontinued operations between 1990 and 2012, this dissertation study finds limited evidence that firms experience improvement in financial performance following discontinued operations and that such improvement is only observed in pre-SFAS 144 era. The results also suggest that any improvement in financial performance documented is conditional on the profitability of the operations discontinued and provide no support for investment efficiency improvement following discontinued operations. Related to the valuation implications of discontinued operations, this dissertation shows that investors differentially value profitable and loss discontinued operations. However, such valuation differences are not dependent on the performance improvement implications. Finally, results support that analyst forecast accuracy of earnings decreases following the reporting of discontinued operations, but such effect is only observed in the pre-SFAS 144 era. This dissertation makes several contributions to the literature. First, this study extends the literature on corporate divestment by using a large sample of discontinuation decisions and hand-collected data on the profitability of the operations discontinued. Second, this research extends the literature on market studies by analyzing whether market response to a discontinuation decision is dependent upon the profitability of the operation discontinued. Third, based upon a review of the literature, it is believed that this is the first study to examine the possibility that analyst forecast accuracy may change following a discontinuation decision. Finally, this study extends the literature that examines the effects of changes in accounting rules and regulations on the informativeness of financial statement items. These results should be of interest to investors, regulators, and analysts.

Author: Ruth Ann McEwen
Publisher:
ISBN:
Category :
Languages : en
Pages :

View

Book Description
In 1994, the AICPA?s Special Committee on Financial Reporting recommended that participants in business reporting can improve the reporting process by focusing on user needs and finding cost-effective ways of aligning business reports with those needs. The Committee noted that professional financial analysts are among the most important users of business reporting and that an examination of their accounting information needs would provide useful insight to the profession. Further, the Committee suggested that an investigation of the link between information usage and decision quality could provide a starting point for determining whether currently reported business information is relevant. The current study examines the relation between the forecast accuracy of financial analysts and specific accounting information items used during financial statement analysis. Findings indicate that relatively more accurate analysts tend to emphasize different information items prior to issuing an earnings forecast than do less accurate analysts. Study results also provide evidence of an association between specific accounting information items and decision quality.