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Discussion of “Are earnings forecasts more accurate when accompanied by cash flow forecasts?”

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  • Reuven Lehavy

    (University of Michigan)

Abstract

Call et al. (Rev Account Stud 2009, this issue) demonstrate that, relative to analysts who issue earnings but not cash flow forecasts, analysts who issue both forecasts (i) produce relatively more accurate earnings forecasts, (ii) have a better understanding of the persistence of current earnings, and (iii) are less likely to get fired. In my discussion, I highlight some general challenges facing research on analyst cash flow forecasts, demonstrate the diminishing difference in the relative accuracy over time (including its compete elimination by 2004), and examine the sensitivity of some of the evidence in Call et al. (2009) to the age of the forecast and to the presence of extreme bad-news earnings surprises.

Suggested Citation

  • Reuven Lehavy, 2009. "Discussion of “Are earnings forecasts more accurate when accompanied by cash flow forecasts?”," Review of Accounting Studies, Springer, vol. 14(2), pages 392-400, September.
    • Handle: RePEc:spr:reaccs:v:14:y:2009:i:2:d:10.1007_s11142-009-9090-y
    DOI: 10.1007/s11142-009-9090-y
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    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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