Analyst forecast, accounting conservatism and the related valuation implications

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

10 Scopus Citations
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Author(s)

  • Byungcherl Charlie Sohn

Related Research Unit(s)

Detail(s)

Original languageEnglish
Pages (from-to)311-341
Journal / PublicationAccounting and Finance
Volume52
Issue numberSUPPL.1
Publication statusPublished - Oct 2012

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. © 2011 AFAANZ.

Research Area(s)

  • Analyst forecast, Conservatism, G12, M41, Valuation