Analyst Reaction to Non-articulation between the Balance Sheet and the Statement of Cash Flows

K.C. Lin, Kuan-Chen Lin

Research output: Contribution to journalArticlepeer-review

Abstract

The purpose of this paper is to investigate the effect of non-articulation on analyst earnings forecast quality. The authors look for evidence on the relationship between non-articulation and analyst earnings forecast properties: forecast inaccuracy, forecast dispersion and forecast bias. The authors hypothesize and find that non-articulation is positively related to analyst forecast dispersion, forecast accuracy and forecast bias for one-year ahead of earnings. The effects of non-articulation on analyst earnings forecast inaccuracy and bias are neutralized when the analyst issues a cash flow forecast and when such forecast provides accurate information regarding the forecasted firm’s operating cash flow. On the other hand, cash flow forecast issuance alone does not mitigate the negative influence of non-articulation.
Original languageEnglish
Pages (from-to)163-184
JournalJournal of Applied Accounting Research
Volume21
Issue number1
StatePublished - Dec 2019

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