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The Impact of the Cadbury Committee Recommendations on Analysts' Earnings Forecasts: UK Evidence

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Author Info
Taylor, Svetlana M. () (Cardiff Business School)
Abstract

This paper examines the relationship between the board structure of UK firms and the accuracy of individual analysts' earnings forecasts with respect to information asymmetry and agency theory. We hypothesize that managers of firms complying with the recommendations of The Code of Best Practice may have "less to hide" and, subsequently, provide more information to outsiders (including analysts), thus facilitating more accurate analysts' forecasts. We find that analysts are more optimistic, but less accurate, for firms with a greater proportion of non-executive directors. This indicates that non-executive directors are inefficient at addressing the agency disclosure problem (at least in terms of the accuracy of analysts. earnings forecasts).

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File URL: http://www.cardiff.ac.uk/carbs/research/working_papers/accounting_finance/A2007_2.pdf
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Publisher Info
Paper provided by Cardiff University, Cardiff Business School, Accounting and Finance Section in its series Cardiff Accounting and Finance Working Papers with number A2007/2.

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Length: 39 pages
Date of creation: Mar 2007
Date of revision:
Handle: RePEc:cdf:accfin:2007/2

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Related research
Keywords: Financial analysts; Forecast accuracy; Corporate governance; Panel data;

Find related papers by JEL classification:
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
G29 - Financial Economics - - Financial Institutions and Services - - - Other
G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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  3. Ashbaugh-Skaife, Hollis & Collins, Daniel W. & LaFond, Ryan, 2006. "The effects of corporate governance on firms' credit ratings," Journal of Accounting and Economics, Elsevier, vol. 42(1-2), pages 203-243, October. [Downloadable!] (restricted)
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  11. Anup Agrawal & Charles R. Knoeber, . "Firm Performance and Mechanisms to Control Agency Problems between Managers and Shareholders (Revision of 29-94)," Rodney L. White Center for Financial Research Working Papers 8-96, Wharton School Rodney L. White Center for Financial Research.
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    Other versions:
  15. Sanjeev Bhojraj & Partha Sengupta, 2003. "Effect of Corporate Governance on Bond Ratings and Yields: The Role of Institutional Investors and Outside Directors," Journal of Business, University of Chicago Press, vol. 76(3), pages 455-476, July. [Downloadable!]
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