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- Title
Analyst forecast, accounting conservatism and the related valuation implications.
- Authors
Sohn, Byungcherl Charlie
- Abstract
This study investigates whether financial analysts incorporate accounting conservatism into their earnings forecasts and whether it is more difficult for them to forecast earnings for less conservative firms, and then examines the impact of the findings on the return predictability of the value-to-price ( V/P) ratio. After controlling for the other factors affecting forecast accuracy, such as earnings predictability and information uncertainty, I find that analysts incorporate accounting conservatism into their earnings forecasts and that forecasting earnings is more difficult for less conservative firms. Consequently, the return predictability of the V/P ratio is stronger for more conservative firms, and previously reported return predictability of the V/P ratio is an average across firms with differing levels of conservatism.
- Subjects
ECONOMIC forecasting; ACCOUNTING; CONSERVATISM; EARNINGS forecasting; VALUATION; BUSINESS enterprises; UNCERTAINTY (Information theory)
- Publication
Accounting & Finance, 2012, Vol 52, p311
- ISSN
0810-5391
- Publication type
Article
- DOI
10.1111/j.1467-629X.2011.00428.x