Analyst Forecast Properties, Financial Distress, and Business Risk

26 Pages Posted: 22 May 2001

See all articles by Stephen John Ciccone

Stephen John Ciccone

University of New Hampshire - Department of Accounting & Finance

Date Written: May 2001

Abstract

This study examines the validity of using analyst forecast properties to proxy for information quality. The results suggest that dispersion and error measures are strongly related to financial distress and business risk. Firms with losses, earnings declines, and volatile earnings have a strong tendency towards high dispersion and error. Furthermore, forecast biases are predictable. Firms with low dispersion or error measures have relatively little forecast optimism, while firms with high dispersion or error measures have high amounts of forecast optimism. This finding is driven by loss firms, which tend to have greater dispersion and error. Caution should thus be employed when using dispersion and error measures to proxy for the quality of the information environment.

Keywords: Analysts, information quality, information asymmetry, forecasts

JEL Classification: G29, M41, D82

Suggested Citation

Ciccone, Stephen J., Analyst Forecast Properties, Financial Distress, and Business Risk (May 2001). Available at SSRN: https://ssrn.com/abstract=270200 or http://dx.doi.org/10.2139/ssrn.270200

Stephen J. Ciccone (Contact Author)

University of New Hampshire - Department of Accounting & Finance ( email )

Durham, NH 03824
United States
603-862-3343 (Phone)
603-862-3383 (Fax)

HOME PAGE: http://pubpages.unh.edu/~sciccone

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