Investor Protection and Analysts' Cash Flow Forecasts Around the World
Mark L. DeFond
University of Southern California - Leventhal School of Accounting
Hong Kong University of Science & Technology (HKUST); University of Southern California - Leventhal School of Accounting; Hong Kong University of Science & Technology (HKUST) - Department of Accounting
Review of Accounting Studies, Forthcoming
We find that analysts are more likely to provide cash flow forecasts in countries with weak investor protection. This finding is consistent with our hypothesis that market participants demand (and analysts supply) cash flow information when weak investor protection results in earnings that are less likely to reflect underlying economic performance. Our results suggest that information intermediaries respond to market-based incentives to attenuate the adverse effects of country-level institutional factors on earnings' usefulness. These findings contribute to the literature by shedding light on the institutional determinants of analysts' research activities, and on the nature of the financial information they generate.
Number of Pages in PDF File: 57
Keywords: international accounting, investor protection, analysts' forecasts, cash flows
JEL Classification: M41, G15
Date posted: July 21, 2002
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