Analysts Cash Flow Forecasts And Accrual Mispricing PDF Download
Are you looking for read ebook online? Search for your book and save it on your Kindle device, PC, phones or tablets. Download Analysts Cash Flow Forecasts And Accrual Mispricing PDF full book. Access full book title Analysts Cash Flow Forecasts And Accrual Mispricing.
| Author | : Shu-Ling Wu |
| Publisher | : |
| Total Pages | : 178 |
| Release | : 2011 |
| Genre | : Budget analysts |
| ISBN | : |
Download Analysts' Cash Flow Forecasts and Accrual Mispricing Book in PDF, ePub and Kindle
This study investigates whether or not the incidence of analysts' cash flow forecasts mitigates the accrual anomaly. I employ an accrual-based trading strategy hedge return test and a regression-based test to compare the accrual anomaly for a group of firms whose analysts provide both cash flow forecasts and earnings forecasts, and for a group of firms whose analysts provide only earnings forecasts. The results show that the accrual-based trading strategy yields no positive hedge returns for firms with cash flow forecasts, while it results in a hedge return of eight percent for firms without cash flow forecasts. The results suggest that analysts' cash flow forecasts can redirect investors' attention to the accrual components of earnings and attenuate the accrual anomaly documented in the prior literature.
| Author | : Elizabeth A. Gordon |
| Publisher | : |
| Total Pages | : |
| Release | : 2014 |
| Genre | : |
| ISBN | : |
Download Do Analysts' Cash Flow Forecasts Mitigate the Accrual Anomaly? International Evidence Book in PDF, ePub and Kindle
We investigate the role of analysts' cash flow forecasts in mitigating the accrual anomaly in an international setting. Based on a sample from 20 world market economies, we find less market overestimation of the accrual component of earnings for firms where analysts issue both cash flow forecasts and earnings forecasts, compared with firms where analysts only issue earnings forecasts. Further tests show that analysts' provisions of cash flow forecasts are more likely to be a mechanism that attenuates investors' fixations on earnings in common law countries as opposed to code law countries. This finding is consistent with cash flow predictions by analysts being useful in countries where public disclosures are the primary communication channels in the capital markets. We also find the accrual anomaly to be less severe when analysts provide more accurate cash flow forecasts in common law countries. Our results are robust to additional sensitivity tests, including controlling for potential sample selection bias and an endogeneity bias.
| Author | : Partha S. Mohanram |
| Publisher | : |
| Total Pages | : 57 |
| Release | : 2014 |
| Genre | : |
| ISBN | : |
Download Analysts' Cash Flow Forecasts and the Decline of the Accruals Anomaly Book in PDF, ePub and Kindle
The accruals anomaly, demonstrated by Sloan (1996), generated significant excess returns consistently for over four decades until 2002, but has apparently weakened in the subsequent period. In this paper, I argue that one factor responsible for this decline is the increasing incidence of analysts' cash flow forecasts that provides markets with forecasts of future accruals. The negative relationship between accruals and future returns is significantly weaker in the presence of cash flow forecasts. This anomalous relationship becomes weaker with the initiation cash flow forecasts but continues after cash flow forecasts are terminated. Further, the mitigating effect of cash flow forecasts is greater for forecasts that are more accurate. The results are incremental to explanations based on the improved accrual quality, reduced manipulation of special items and restructuring charges and greater investment in accruals strategies by hedge funds and highlight the increasing importance of analysts' cash flow forecasts in the appropriate valuation of stocks.
| Author | : Nikolay Draganov |
| Publisher | : GRIN Verlag |
| Total Pages | : 62 |
| Release | : 2021-08-10 |
| Genre | : Business & Economics |
| ISBN | : 3346463400 |
Download The usefulness of accounting measures in predicting future cash flow Book in PDF, ePub and Kindle
Master's Thesis from the year 2021 in the subject Business economics - Accounting and Taxes, grade: 1,0, University of Cologne, language: English, abstract: The primary aim of this study is to empirically examine the relative ability of accounting earnings and cash flow to predict future cash flow. Moreover, the role of accruals in cash flow predictions is called into question. One of the major purposes of financial reporting consists in ensuring an informational basis that helps investors, creditors and other users of accounting data to overcome the uncertainty associated with the future cash flows of enterprises their financial activity relates to. At the same time, the accrual concept prevails in modern accounting, since it is theorized to mitigate the mismatching and timing problems of the unrefined cash ba-sis accounting. Hence, recognizing revenues and expenses in the period when they have occurred, and not when cash was received or paid out, should create a more relevant framework for decision making. The use of accrual accounting earnings as a summary measure of financial performance instead of the more primitive cash flows is therefore advocated by accounting standard setters. For instance, the Financial Accounting Stand-ard Board claims that: “Information about enterprise earnings and its components measured by accrual accounting generally provides a better indica-tion of enterprise performance than information about current cash receipts and pay-ments”. The FASB’s statement led to a rising discussion in the financial research on whether accounting earnings provide a more reliable picture of a company’s future operating cash flows than current operating cash flows themselves do. Hence, a major implication of the above quotation refers to the incremental power of accruals and its components in predicting future cash flows beyond the one contained into current operating cash flows. This debate represents a cornerstone in evaluating the information quality offered by the accrual accounting concept.
| Author | : Noor Hashim |
| Publisher | : |
| Total Pages | : 49 |
| Release | : 2016 |
| Genre | : |
| ISBN | : |
Download Do Analysts' Cash Flow Forecasts Improve the Accuracy of Their Target Prices? Book in PDF, ePub and Kindle
Current evidence on the sophistication of analysts' cash flow forecasts is ambiguous. For example, Call et al. (2009) show that issuing cash flow forecasts has important benefits for analysts' earnings forecasts, while Givoly et al. (2009) question the validity of this result, arguing that analysts' cash flow forecasts are simple extrapolations of their earnings forecasts and provide limited incremental information. More recently, Mohanram (2014) and Radhakrishnan and Wu (2014) show that the increasing incidence of cash flow forecasts has helped mitigate accruals mispricing. We contribute to the debate on the usefulness of analysts' cash flow forecasts and their effect on capital market outcomes by examining whether cash flow forecasts have incremental benefits over earnings for analysts' valuation outcomes. We find that analysts who are better at forecasting cash flows are better at forecasting target prices, even after controlling for the quality of their earnings forecasts. Our study provides confirmatory evidence on the sophistication of analysts' cash flow forecasts.
| Author | : Ramesh Narayana Chari |
| Publisher | : |
| Total Pages | : 140 |
| Release | : 1998 |
| Genre | : |
| ISBN | : |
Download Analysts' Use of Accruals and Cash Flows in Forecasting Earnings Book in PDF, ePub and Kindle
This research investigates whether financial analysts fully incorporate the information contained in accrual and cash flow components of current earnings when forecasting future earnings. I present evidence that analysts fail to fully incorporate the implications of these components for earnings persistence in their forecasts. Analysts' appear to ignore information in past earnings to a greater extent when the magnitude of accruals in prior year earnings is large relative to cash flows. I find that information in these components can be used to improve analysts' forecasts. This improvement is most evident for firms which have a high incidence of accruals in prior year earnings. I demonstrate the economic significance of improving analysts' forecasts by implementing a trading strategy that predicts stock price changes. This trading strategy yields significantly positive risk-adjusted abnormal returns. These results suggest that analysts' forecasting inefficiency (see Mendenhall, 1991) is potentially rooted in their misperceptions about the implications of accruals and cash flows for earnings persistence. These findings are useful to accounting standard-setters and to capital markets research that uses analysts' forecasts to proxy for earnings expectations.
| Author | : Andrew Fight |
| Publisher | : Elsevier |
| Total Pages | : 263 |
| Release | : 2005-10-12 |
| Genre | : Business & Economics |
| ISBN | : 0080492533 |
Download Cash Flow Forecasting Book in PDF, ePub and Kindle
Budgets are like road maps -- they provide a direction for a corporates financial management. Balance sheets and statements of revenues also provide insights into how well a company is following that direction. But cash flow and cash flow forecasts are what guide the day-to-day itinerary for an organization. Budgets and cash flow are dynamic -- adjustments and changes can and should occur. If you understand what you are looking at, you can use cash flow to create better budgets and thus more accurate cash flow forecasting. Cash Flow Forecasting outlines the techniques required to undertake a detailed analysis of the cash flow dynamics of the business from both a historical and forward looking perspective. Cash Flow Forecasting explains how to: * Determine appropriate cash flow figures from pro forma financial statements * Interpret detailed cash flow forecasts and understand the difference between profit and cash flow * Conserve or generate cash in the short term * Evaluate different methods of project evaluation * Recognize the limitations of accounting information in valuing companies *Inspired by basic entry level training courses that have been developed by major international banks worldwide * Will enable students and those already in the finance profession to gain an understanding of the basic information and principles of cash flow forecasting * Includes questions with answers, study topics, practical "real world" examples and extensive bibliography
| Author | : Anwer S. Ahmed |
| Publisher | : |
| Total Pages | : 38 |
| Release | : 2008 |
| Genre | : |
| ISBN | : |
Download Do Analysts' Forecasts Fully Reflect the Information in Accruals? Book in PDF, ePub and Kindle
This study investigates whether financial analysts correctly weight cash flows, accruals and components of accruals in forecasting future earnings. This examination is in the spirit of Sloan (1996) who documents evidence that investors do not correctly distinguish between the cash flow and accrual components of earnings. We find that analysts do distinguish between accruals and cash flows although they generally underweight the information in both accruals and cash flows. More importantly, we find that analysts do not distinguish between discretionary and non-discretionary accruals even though discretionary accruals are less persistent than non-discretionary accruals. Our findings complement and extend the findings in recent studies on analyst forecast inefficiency with respect to the information in accrual and cash flow components of earnings using alternative research designs [Teoh and Wong (1998), Bradshaw, Richardson and Sloan (2000), Barth and Hutton (2000)]. Analysts are considered to play an important role as information intermediaries in educating investors about the future prospects of firms. They are trained in analyzing financial data and have industry expertise as well as detailed firm-specific knowledge through contacts with managers. Thus, one would expect analysts to correctly incorporate the information in earnings components specifically discretionary versus non-discretionary accruals. Our evidence complements evidence in recent studies that raises questions about the ability of analysts, on-average, to correctly incorporate the information in accruals and cash flows in forecasting future earnings. This in turn implies that other outsiders are also likely to find it difficult to undo earnings management via discretionary accruals and therefore provides a rationale for the existence of earnings management.
| Author | : Timothy Jury |
| Publisher | : John Wiley & Sons |
| Total Pages | : 341 |
| Release | : 2012-05-03 |
| Genre | : Business & Economics |
| ISBN | : 1119968747 |
Download Cash Flow Analysis and Forecasting Book in PDF, ePub and Kindle
This book is the definitive guide to cash flow statement analysis and forecasting. It takes the reader from an introduction about how cash flows move within a business, through to a detailed review of the contents of a cash flow statement. This is followed by detailed guidance on how to restate cash flows into a template format. The book shows how to use the template to analyse the data from start up, growth, mature and declining companies, and those using US GAAP and IAS reporting. The book includes real world examples from such companies as Black and Decker (US), Fiat (Italy) and Tesco (UK). A section on cash flow forecasting includes full coverage of spreadsheet risk and good practice. Complete with chapters of particular interest to those involved in credit markets as lenders or counter-parties, those running businesses and those in equity investing, this book is the definitive guide to understanding and interpreting cash flow data.
| Author | : Sami Keskek |
| Publisher | : |
| Total Pages | : 49 |
| Release | : 2013 |
| Genre | : |
| ISBN | : |
Download Did Analysts Contribute to the Disappearance of the Accrual Anomaly? Book in PDF, ePub and Kindle
We use the recent disappearance of the accrual anomaly to investigate analysts' contribution to improved information processing by investors. Prior research finds that investors and analysts made accrual-related pricing and forecast errors, respectively, in the anomaly period. As sophisticated information intermediaries, analysts could have corrected their accrual-related forecast bias and thus provided a mechanism for investors to correct accrual-related mispricing. Using all-star status and the analyst's provision of a cash flow forecast as proxies for expertise, we find that both expert and non-expert analysts continue to issue forecasts with predictable accrual-related bias after the disappearance of the accrual anomaly. Furthermore, the accrual anomaly is similar for firms followed by analysts and for non-followed firms, and disappears at the same time for both. Thus, investors began to correctly incorporate accruals information in security prices even though analysts continued issuing earnings forecasts that have predictable accrual-related bias. Our results conflict with the widely-held notion that analysts are sophisticated information intermediaries who improve market efficiency.
