The Quality of Analysts' Cash Flow Forecasts

Accounting Review, Forthcoming

53 Pages Posted: 21 Jun 2009

See all articles by Dan Givoly

Dan Givoly

Pennsylvania State University, Smeal College of Business

Carla Hayn

University of California at Los Angeles - Anderson School of Management

Reuven Lehavy

University of Michigan, Stephen M. Ross School of Business

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Date Written: February 16, 2009

Abstract

This study examines properties of analysts’ cash flow forecasts and compares them to those exhibited by analysts’ earnings forecasts. Our results indicate that analysts’ cash flow forecasts are less accurate than analysts’ earnings forecasts and improve at a slower rate during the forecast period. Further, cash flow forecasts appear to be a naïve extension of analysts’ earnings forecasts, thus providing limited information on expected changes in working capital. We also find that analysts’ forecasts of cash flows are of limited information content and are only weakly associated with stock returns. Finally, estimating expected accruals as the difference between analysts’ earnings forecasts and their cash flow forecasts does not result in a better detection of earnings management than achieved by commonly used accrual models.

JEL Classification: M41, M43

Suggested Citation

Givoly, Dan and Hayn, Carla and Lehavy, Reuven, The Quality of Analysts' Cash Flow Forecasts (February 16, 2009). Accounting Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1423137

Dan Givoly (Contact Author)

Pennsylvania State University, Smeal College of Business ( email )

305 Business Building
University Park, PA 16802
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814-865-0587 (Phone)
814-863-8393 (Fax)

Carla Hayn

University of California at Los Angeles - Anderson School of Management ( email )

D410 Anderson Complex
Los Angeles, CA 90095-1481
United States
310-206-9225 (Phone)

Reuven Lehavy

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI 48109
United States
734-763-1508 (Phone)
734-936-0282 (Fax)

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