Do Analysts' Cash Flow Forecasts Encourage Managers to Improve the Firm's Cash Flows? Evidence from Tax Planning

Ayers, Benjamin C.; Call, Andrew C.; Schwab, Casey M.

doi:10.1111/1911-3846.12403

Cited by 32 publications

(20 citation statements)

References 64 publications

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“…The measurement of the domestic institutional shareholders is the same as used by Thanatawee (2014) [3]. The control variables used in this paper are the same as used in the previous papers, such as size used by Ayers et.al (2018) [16], as leverage used by Klassen et.al [17], and as EPS modified from price used by Balakrishnan et.al (2017) [18]. The measuremant of the variables used in this study are in Table 1.…”

Section: Methodsmentioning

confidence: 99%

Tax Amnesty as a Control Variable Affects The Relationship between Domestic Institutional Shareholders and the Firm Value.

Santoso¹,

Maksum²,

Ramli³

et al. 2020

Proceedings of the the 3rd International Conference on Advance &Amp; Scientific Innovation

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The number of shares owned by the domestic institutional shareholders influences the firm value. The next question is whether this relationship is linear or nonlinear. When the tax amnesty policy enacted, management will adjust the strategies that influence on the firm value. The tax amnesty policy also influences the relationship between the domestic institutional shareholders and the firm value. By using the manufacturing firm listed in the Indonesia Stock Exchange, the comparative casual method, and the tax amnesty policy as a control variable, this study find out that the relationship between the domestic institutional shareholders and the firm value is nonlinear and inverted U-shaped, both with and without the tax amnesty policy. When using the tax amnesty policy as a control variable, the relationship between the domestic institutional shareholders and the firm value is getting weaker. It is estimated that this weakening is a management reaction to the tax amnesty policy whose influence is more significant compared to the influence of the domestic institutional shareholders on the firm value.

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Section: Methodsmentioning

confidence: 99%

Tax Amnesty as a Control Variable Affects The Relationship between Domestic Institutional Shareholders and the Firm Value.

Santoso¹,

Maksum²,

Ramli³

et al. 2020

Proceedings of the the 3rd International Conference on Advance &Amp; Scientific Innovation

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“…Lee (2012) finds that cash flow forecasts motivate managers to opportunistically increase reported operating cash flows. Ayers et al (2018) find that analysts' cash flow forecasts give the managers the motivation to enhance the firm's cash flow position through tax avoidance activities.…”

Section: Contrary Tomentioning

confidence: 99%

International Evidence on the Quality of Analysts' Cash Flow Forecasts.

Wang¹,

Yu²

2020

Preprint

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Using a large international sample from 1995 to 2018, we find that earnings forecasts accompanied with cash flow forecasts are more accurate than those not accompanied with cash flow forecasts, suggesting that Call et al. (2009)'s findings in U.S. apply to other countries. We then explore country characteristics that moderate the effect of cash flow forecast provisions on earnings forecast accuracy. We find that the positive association between cash flow forecast provisions and earnings forecast accuracy is more pronounced for firms domiciled in countries with a low disclosure level. We also expect and find that the positive association between cash flow forecast provisions and earnings forecast accuracy is stronger before mandatory IFRS adoption. Taken together, our results suggest that the advantage of forecasting cash flow, in terms of improving analysts' own earnings forecasts, is mitigated in countries with higher disclosure level and after mandatory adoption of IFRS.

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“…The findings suggest that financial analysts are using their cash flow forecasts as important information in making stock recommendations. Ayers et al (2018) have examined whether analysts' cash flow forecasts encourage managers to enhance a firm's cash flow position through tax avoidance activities. Consistent with the notion that ACFF encourages tax avoidance in order to enhance a firm's cash flow health, they find a negative relationship between cash tax payments and analysts' cash flow coverage.…”

Section: Analysts' Cash Flow Forecasts and Firm Valuementioning

confidence: 99%

Do Analysts’ Cash Flow Forecasts Improve Firm Value?

Park

Kim

2020

IJFS

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We examine whether analysts’ cash flow forecasts improve firm value. First, we analyze whether the joint issuance of financial analysts’ earnings and cash flow forecasts improve firm value. Second, we analyze whether the quality of analysts’ cash flow forecasts improve firm value. The empirical results of our study are as follows. First, the joint issuance of analysts’ earnings and cash flow forecasts has a significantly positive effect on firm value; providing cash flow forecasts reduces information asymmetry and increases earnings quality, thereby increasing corporate value. Second, the quality of analysts’ cash flow forecasts has a significantly positive effect on firm value; the more accurate cash flow forecasts are, the higher firm value is. Our study provides empirical evidence for that the conclusion that cash flow forecasting information produced by financial analysts provides useful information for capital market participants in economic decision making.

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Do Analysts' Cash Flow Forecasts Encourage Managers to Improve the Firm's Cash Flows? Evidence from Tax Planning

Cited by 32 publications

References 64 publications

Tax Amnesty as a Control Variable Affects The Relationship between Domestic Institutional Shareholders and the Firm Value.

Tax Amnesty as a Control Variable Affects The Relationship between Domestic Institutional Shareholders and the Firm Value.

International Evidence on the Quality of Analysts' Cash Flow Forecasts.

Do Analysts’ Cash Flow Forecasts Improve Firm Value?

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