ABSTRACT: This study examines whether the market reacts more strongly to earnings forecast revisions when financial analysts supplement their earnings forecasts with sales forecasts. I find that earnings forecast revisions supplemented with sales forecast revisions have a greater impact on security prices than do stand-alone earnings forecast revisions, controlling for the incremental information content in sales forecasts. Supplemented earnings forecasts are more accurate ex post, controlling for other individual analyst characteristics. Results are robust to controlling for earnings persistence and time effects. Taken as a whole, financial analysts are more likely to supplement their earnings forecasts with sales forecasts when they have better information. Supplementary sales forecasts appear to lend credibility to earnings forecasts because financial analysts provide sales forecasts when they are more informed.
Skip Nav Destination
Article navigation
1 November 2010
Research Article|
November 01 2010
Do Supplementary Sales Forecasts Increase the Credibility of Financial Analysts’ Earnings Forecasts?
Edmund C. Keung
Edmund C. Keung
National University of Singapore
Search for other works by this author on:
Online ISSN: 1558-7967
Print ISSN: 0001-4826
American Accounting Association
2010
The Accounting Review (2010) 85 (6): 2047–2074.
Citation
Edmund C. Keung; Do Supplementary Sales Forecasts Increase the Credibility of Financial Analysts’ Earnings Forecasts?. The Accounting Review 1 November 2010; 85 (6): 2047–2074. https://doi.org/10.2308/accr.2010.85.6.2047
Download citation file:
Pay-Per-View Access
$25.00