Cash flow signals and analysts' earnings forecast revisions
Moses, O. Douglas
MetadataShow full item record
This study investigates the incorporation of cash flow information in forecasts of earnings made by security analysts. It extends and links two streams of research in accounting. One stream of research has been concerned with revisions in earnings forecasts made by analysts. What factors lead to forecast revisions? Prior research has concentrated on investigating revisions of earnings forecasts in response to earnings announcements. A critique of that literature notes that there is a lack of knowledge concerning other factors that lead to forecast revisions (Brown, et al., 1985, p. 130). This study extends that research by identifying accounting measures beyond earnings apparently deemed informative to analysts when predicting future earnings. The second stream of research has been concerned with the question of whether a decomposition of earnings into cash flow and accrual components provides incremental information beyond that contained in earnings alone.Ã Â¢ Is such a decomposition informative? Is a dollar of accrual accounting earnings (worth) the same as a dollar of cash flow? Prior research has investigated this question through analysis of security returns. Findings have been somewhat contradictory. This study extends that research by addressing the question of the use of earnings component information in the previously unexamined context of the formation of analysts' earnings forecasts. In doing so, the study provides evidence on the signal conveyed by earnings components as perceived by one major group of users of accounting information.
RightsThis publication is a work of the U.S. Government as defined in Title 17, United States Code, Section 101. Copyright protection is not available for this work in the United States.
Showing items related by title, author, creator and subject.
Tests of the Usefulness of Analyst Earnings Forecast Data in Predicting Bankruptcy of Public Corporations Moses, O. Douglas (Monterey, California. Naval Postgraduate School, 1986-10); NPS-54-86-011This study investigate five properties of earnings forecasts made by financial analysts to determine if systematic differences in these properties exists between failing and healthy firms. The five properties are: The level ...
Ropiak, Michael J. (Monterey, California. Naval Postgraduate School, 2000-06);Accurate forecasting of repair turn-around time (RTAT) of United States Navy depot level repairable items is critical to achieving optimal service levels while minimizing procurement and repair costs. The Navy's Inventory ...
Moses, O. Douglas (Monterey, California. Naval Postgraduate School, 1986-11); NPS-54-86-015This study investigates four properties of earnings forecasts made by financial analysts to determine if systematic differences in these properties exists failing and healthy firms. The four properties are: The level of ...