The joint information role of analysts’ cash flow and earnings forecasts

Sandip Dhole, Ferdinand A. Gul, Sagarika Mishra, Ananda M. Pal

Research output: Contribution to journalArticleResearchpeer-review

Abstract

We study whether the relative magnitudes of analysts’ cash flow and earnings forecasts convey information about the persistence and value relevance of reported earnings. We find that reported earnings are likely to be more (less) persistent and value relevant when analysts forecast relatively moderate (extreme) levels of operating cash flows, relative to earnings. We also find that the market’s response to a given earnings surprise is the strongest for moderate levels of cash flow forecasts relative to earnings. The joint information role of analysts’ cash flow and earnings forecasts persists even after controlling for the absolute accruals in the model.

Original languageEnglish
Number of pages43
JournalAccounting & Finance
DOIs
Publication statusAccepted/In press - 2019

Keywords

  • Analysts' cash flow forecasts
  • Analysts' earnings forecasts
  • Earnings persistence
  • Earnings quality
  • Value relevance of earnings

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