IDEAS home Printed from https://ideas.repec.org/p/dkn/ecomet/fe_2013_01.html
   My bibliography  Save this paper

Further Evidence on the Importance of Analysts’ Cash Flow Forecasts

Author

Listed:
  • Sandip Dhole

    (ISB, Hyderabad)

  • Sagarika Mishra

    (Deakin University)

  • Ananda M Pal

    (University of Calcutta)

Abstract

Analysts’ cash flow (CPS) forecasts have been the topic of much recent research. While some prior research (for example, Givoly et al., 2009) suggests that these forecasts have very limited usefulness, Call et al. (2012) find evidence to the contrary. We take this body of research forward and find that CPS forecasts improve the firm’s information environment by reducing the information asymmetry, as evidenced by lower post-earnings announcement drift and bid-ask spread around the earnings announcement. We also examine the usefulness of CPS forecasts as a source of value-relevant information and construct a composite earnings forecast, based on the EPS forecast and the CPS forecast. We find a significant market reaction to the composite forecast error, controlling for the EPS forecast error. Finally, we show that the composite forecast performs better than the EPS forecast in capturing the market’s expectations under some situations.

Suggested Citation

  • Sandip Dhole & Sagarika Mishra & Ananda M Pal, "undated". "Further Evidence on the Importance of Analysts’ Cash Flow Forecasts," Working Papers 2013_01, Deakin University, Department of Economics.
    • Handle: RePEc:dkn:ecomet:fe_2013_01
    as

    Download full text from publisher

    File URL: http://www.deakin.edu.au/buslaw/aef/workingpapers/fin-econometrics/2013_01.pdf
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    Analysts’ Cash Flow Forecasts; Analysts’ Earnings Forecasts; Information Asymmetry; Bid-Ask Spread; Post-Earnings Announcement Drift; Analyst Forecast Dispersion; Earnings Volatility; Firm Size;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:dkn:ecomet:fe_2013_01. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Xueli Tang (email available below). General contact details of provider: https://edirc.repec.org/data/sedeaau.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.