Firm Life Cycle and Analyst Forecast Behavior

Hamers, Lars; Renders, Annelies; Vorst, Patrick

doi:10.2139/ssrn.2874845

Cited by 8 publications

(9 citation statements)

References 3 publications

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“…This stage also increases the demand for accountability and transparency from the firm in order to seek additional external financings . Further, through the visibility hypothesis, (Hamers et al 2016) have documented that analyst following is much greater in the growth stage as compared other CLC stages, which might dampen the managers' involvement in EM tactics. Krishnan et al (2018) also assert that growth firms exhibit proper internal control and monitoring mechanisms and consequently a higher financial reporting quality.…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

When Does Earnings Management Matter? Evidence across the Corporate Life Cycle for Non-Financial Chinese Listed Companies

Hussain

Akbar

Khan

et al. 2020

JRFM

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Information availability, firm performance, idiosyncratic volatility and bankruptcy-risk vary across the Corporate Life Cycle (CLC) stages. The purpose of this paper is to examine whether CLC stages explain firm’s propensity to engage in both accrual base and real earning management practices in the context of China. Panel data of 3250 non-financial Chinese listed firms spanning from 2009 to 2018 is used to investigate the proposed relationship. CLC stages were captured through Dickinson’s model, while earnings management is measured by employing both techniques, i.e., accruals-base earnings management and real earnings management. The data were analyzed through Panel data fixed-effects and random-effects techniques. Results reveal that, when compared to shakeout phase, managers’ response to use both earnings management practices is significantly higher during introduction and decline phases, and lower during growth and mature stages of CLC. It suggests that introductory and later-staged firms distort their factual financial information from creditors to obtain loans without strict debt covenants. Our results are robust to alternate measures and specifications. The core contribution of this research is to add a fresh perspective to the CLC research by uncovering its imperative role in influencing the earning management behavior of corporate managers.

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Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

When Does Earnings Management Matter? Evidence across the Corporate Life Cycle for Non-Financial Chinese Listed Companies

Hussain

Akbar

Khan

et al. 2020

JRFM

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“…The data for these variables has been procured from Institutional Brokers Estimate System (IBES) annual update.Firm Characteristics: The forecast accuracy and recommendations also depend on factors like firm size (Lim, 2001), age of the firm (Hamers et al. , 2016), dividend policy (Huang et al.…”

Section: Sample Data and Methodologymentioning

confidence: 99%

“…Firm Characteristics: The forecast accuracy and recommendations also depend on factors like firm size (Lim, 2001), age of the firm (Hamers et al. , 2016), dividend policy (Huang et al.…”

Section: Sample Data and Methodologymentioning

confidence: 99%

“…It may differ based on firm and analyst factors. The age of the firm and the experience of the analysts are crucial factors in determining the strength of the relationship between firm managers and analysts, thus, impacting optimism (Hamers et al, 2016;Lorenz and Homburg, 2018). We expect that if the analysts depend on managers for information and intend to earn more brokerage during uncertain periods, the more experienced analysts shall favor optimistic forecasts and recommendations to maintain their relationship.…”

Section: Analyst Optimism and Uncertaintymentioning

confidence: 99%

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Analyst optimism, uncertainty and regulation: evidence from the Indian market

Singla

Chakraborty

Singh

2023

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PurposeThe study examines the effect of increased Economic Policy uncertainty on analyst optimism in the Indian market. The study also explores whether the SEBI Research Analyst Regulation, 2014, has effectively contained the optimistic nature of analysts.Design/methodology/approachThe study is based on firms in the Indian market. The sample period is 2003–2020. It runs a linear panel regression to measure the impact of Economic Policy uncertainty on the optimism level of analysts' forecasts and recommendations, controlling for firm fixed effects. Further, the impact of the SEBI Research Analyst Regulation, 2014, has been assessed with the help of the difference-in-difference approach.FindingsThe Economic Policy uncertainty is significantly and positively related to the analyst optimism, reflected in the forecast bias and recommendation in the Indian context. The experience of analysts and the age of the firm positively drive optimism. However, introducing the Research Analyst Regulation by SEBI led to a decline in analyst optimism. The regulation decoupled the analysts' compensation from brokerage service transactions. Thus, the results suggest that the regulation has effectively curbed the incentive to produce optimistic output.Originality/valueThis is the first study in the Indian market to assess the impact of uncertainty on analyst output. It also investigates the effectiveness of the first analyst-specific regulation in India, i.e. The Research Analyst Regulation, 2014.

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“…) ‫بب‬ ‫بحلبييا:ب‬ ‫،لبثهعحبحثحاب‬ ‫ق‬ ‫ب‬ Flesch Reading Ease Index, flesh-kincaid grade; Fog Index, Bog Index‫;ب‬ SMOG Index, Lix Index, Cloze Procedure. (Li, 2008;Lo et al, 2017;Xu et al, 2020 (Callaghan et al, 2008;Yuniarti, 2011;El-Gammal, 2012;Barua et al, 2020;Chakrabarty et al, 2020 (Simunic, 1980;Kim and Fukukawa, 2013;Woo & Lim, 2015;Jiang and Son, 2015;Hossain et al, 2019;Salehi et al, 2020;Saghafi et al, (Hossain & Salama, 2018;Hossain et al, 2019;Salehi et al, 2020;Xu et al, 2020;Wang et al, 2021;Castro et al, (Hamers et al, 2016;Habib and Hasan, 2017;2019;Krishnan et al, 2021;Yoo et al, 2019;Akbar et al, 2019;Hussain et al, 2020;Can, 2020 (Hossain & Salama, 2018;Cho et al, 2019;Abernathy et al, 2019;Hossain et al, 2019;Castro et al, 2019;Blanco et al, 2020;Xu et al, 2020;Salehi et al, 2020;Karim and sarkar, 2020;Kazemiolum et al, 2020;Wang et al, (Cho et al, 2019;...…”

Section: ‫البحث‬ ‫ممخص‬mentioning

confidence: 99%

أثر قابلیة التقاریر المالیة للقراءة ومراحل دورة حیاة الشركة على أتعاب المراجعة دراسة تطبیقیة على الشركات غیر المالیة المقیدة بالبورصة المصریة

طلخان¹

2022

مجلة الاسکندریة للبحوث المحاسبیة

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The research aims to study and exmain the impact of the Financial Reports Readability, as well as the firm life cycle stages on the audit fees. Using an applied study on a sample of non-financial companies listed in the Egyptian Stock Exchange, which amounted to (78) companies in different sectors, with a total of (229) observations, during the period from 2017-2019. The results of the study showed a significant negative relationship between the readability of financial reports and audit fees. There is also a practical evidence in the Egyptian environment that there is a different impact of the firm life cycle stages on the audit fees, and it became clear that the company entering the growth phase has a greater significant positive impact on audit fees, compared to the shack out phase, while the rest of the phases had no significant impact on audit fees. This indicates an increase in the ability of growth stage to explain changes in audit fees compared to other stages. This means that the audit fees vary across the firm life cycle stages.To ensure the accuracy and integrity of the study results, some additional analyzes were performed using several alternative measures of readability and company life cycle stages, as well as excluding some control variables that do not affect audit fees. The results supported the results of the basic analysis, The results were that the number of pages of the financial statements and their footnotes represent the main pillar and cornerstone for the auditor to estimate the risks, efforts and audit fees in the Egyptian practice environment, and that the number of pages of the Board of Directors report, and the number of footnotes do not represent a good indicator for readability. There is also a significant negative effect of readability on audit fees even after excluding some control variables that do not have a significant effect on audit fees. Also, all the alternative measures for the firm life cycle stages agreed that the growth stage has a significant impact on audit fees compared to other stages, which means that there is a difference in audit fees across the firm life cycle stages, and this indicates the accuracy and integrity of the results reached in the stage of basic analysis. These results are important for the Egyptian Financial Supervisory Authority, the Egyptian Stock Exchange, and auditors.

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Firm Life Cycle and Analyst Forecast Behavior

Cited by 8 publications

References 3 publications

When Does Earnings Management Matter? Evidence across the Corporate Life Cycle for Non-Financial Chinese Listed Companies

When Does Earnings Management Matter? Evidence across the Corporate Life Cycle for Non-Financial Chinese Listed Companies

Analyst optimism, uncertainty and regulation: evidence from the Indian market

أثر قابلیة التقاریر المالیة للقراءة ومراحل دورة حیاة الشركة على أتعاب المراجعة دراسة تطبیقیة على الشركات غیر المالیة المقیدة بالبورصة المصریة

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