Is Analyst Forecast Accuracy Associated with Accounting Information Use? (Retracted)

Abstract

SYNOPSIS:In 1994, the AICPA's Special Committee on Financial Reporting recommended that participants in business reporting can improve the reporting process by focusing on user needs and finding cost-effective ways of aligning business reports with those needs. The Committee noted that professional financial analysts are among the most important users of business reporting and that an examination of their accounting information needs would provide useful insight to the profession. Further, the Committee suggested that an investigation of the link between information usage and decision quality could provide a starting point for determining whether currently reported business information is relevant. The current study examines the relation between the forecast accuracy of financial analysts and specific accounting information items used during financial statement analysis. Findings indicate that relatively more accurate analysts tend to emphasize different information items prior to issuing an earnings forecast than do less accurate analysts. Study results also provide evidence of an association between specific accounting information items and decision quality.

Financial reporting complexity and investor underreaction to 10-K information

“…Hirst and Hopkins (1998) document that analysts fail to access comprehensive income information under certain reporting formats and suggest that ''clear reporting'' of information increases analysts' use of it. McEwen and Hunton (1999) document that analysts whose forecasts are less accurate tend to ignore certain information. They speculate that this effect ''may be a function of its relevance, complexity, or both.'…”

Exploring the Impact of Internal Corporate Governance on the Relation Between Disclosure Quality and Earnings Management in the UK Listed Companies

“…11 Prior studies show that a firm's disclosure carries a predictable value to analyst forecast (Lang and Lundholm 1996;McEwen and Hunton 1999;Hope 2003;Bhat et al 2006;Ertimur et al 2007) and analysts are able to predict earnings accurately in the presence of high disclosure quality settings (Byard et al 2006). This suggests that AFA is a reflection of a firm's disclosure environment (Ernstberger et al 2008).…”

An examination of factors affecting Chinese financial analysts’ information comprehension, analyzing ability, and job quality

“…In an experimental study, Hirst and Hopkins (1998) show that clear reporting of comprehensive income and its components are effective in facilitating the detection of firms' earnings management activities by the analysts, and thus in affecting analysts' valuation judgments. McEwen and Hunton (1999) find that specific accounting information items used during financial statement analysis differ among more or less accurate analysts. Specifically, more accurate analysts emphasize income indicators over longer time-horizons and tend to use summary indicators, while less accurate analysts emphasize balance sheet items and footnotes.…”

“…McEwen and Hunton (1999) find that specific accounting information items used during financial statement analysis differ among more or less accurate analysts. Further, analysts' communication with managers, such as corporate presentations, earnings preannouncements, and conference calls, are an essential source of task-relevant information, and hence to a large extent, influence analysts' behavior and performance (Francis et al 1997;Tan et al 2002;Bowen et al 2002).…”