Using Value Line and IBES Analyst Forecasts in Accounting Research

Philbrick, Donna R.; Ricks, William E.

doi:10.2307/2491057

Cited by 194 publications

(81 citation statements)

References 4 publications

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“…15 13 First Call was excluded because its data were not available prior to 1992. 14 The second factor is consistent with the findings of Philbrick and Ricks (1991), who quoted I/B/E/S as stating that 1989-1991 marked a period of significant cleanup of their data. AL (2002, p. 11) also referred to conversations with officials at Zacks and I/B/E/S that indicated "that the events of 1990 did cause procedural changes over the next year that were designed to align more closely the definition of earnings to be forecast by analysts to the definition of reported earnings employed by the FDPs."…”

Section: Components Of Forecast Errorssupporting

confidence: 77%

Security Analyst Independence

FrancisJennifer¹,

ChenQi²,

PhilbrickDonna³

et al. 2004

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Section: Components Of Forecast Errorssupporting

confidence: 77%

Security Analyst Independence

FrancisJennifer¹,

ChenQi²,

PhilbrickDonna³

et al. 2004

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“…According to Philbrick & Ricks (1991), this measure of profit tends to include income from continuing operations (that is operating and non-operating income), that it adjusts for certain special items and income tax expense, but excludes separately reported items (discontinued operations, extraordinary items and changes in accounting principle for years before 2006).…”

Section: Discussionmentioning

confidence: 99%

“…Specifically, the study shows that operating, non-operating income and special items are useful for predicting bottom line income in decreasing order. This study does not examine special items because they are one-off in nature and tend not to be the focus of analysts (Philbrick & Ricks, 1991). Operating income and non-operating income are both of a continuing nature and so it would seem puzzling that they differ in their predictive ability for income from continuing operations.…”

Section: Relation To Prior Literaturementioning

confidence: 99%

The Proportion of Non-Operating Income, and Analysts’ Forecasts

Anabila¹

2012

IJEF

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The US Senate Committee that investigated the Enron disaster assessed the role of analysts. At issue was whether analysts misled the public by ignoring warning signals that included a high proportion of non-operating income. Non-operating income derives from secondary activities like investments, but operating income is from the primary business activities like manufacturing. While the analysts admitted their limited ability to forecast Enron's earnings, they denied any intentional deceit and claimed that they were misled by Enron. This study asks whether analysts' ability to predict earnings is generally negatively associated with the proportion of non-operating income. The rationale is to determine whether the limited ability of analysts to predict earnings for Enron was an isolated incident or a pervasive one that applies to other firms. If pervasive, then another such disaster could occur without a warning from analysts. First, I examine the incentives for firms to resort more to non-operating income rather than focus on Operating income. Then I examine the association between analysts' forecast attributes and the ratio of nonoperating to operating income. The results show that non-operating income and operating income are negatively associated, suggesting that firms use non-operating income to manage their operating results. Also, analysts' forecast inaccuracy and dispersion are positively associated with the ratio of non-operating income to operating income. These results imply that analysts are generally inefficient in predicting earnings of firms with a high proportion of non-operating income.

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“…Previous research has documented that analyst forecasts are optimistically biased (see O'Brien (1988), Butler and Lang (1991), Philbrick and Ricks (1991), Abarbanell (1991), and Ali, et al (1992)). The Value Line forecasts here are consistent with this finding.…”

Section: Methodsmentioning

confidence: 99%

“…See for example Williams (1996), Doran (1994), Philbrick and Ricks (1991), and Doran (1995). 2 For example studies of relative accuracy of forecast agents (see Brown and Rozeff (1978), Fried and Givoly (1982), Brown et.…”

mentioning

confidence: 99%