Analysts' Dividend Forecasts

40 Pages Posted: 12 Jun 2002

See all articles by Alex Clarke

Alex Clarke

The University of Western Australia - Department of Accounting and Finance

Philip R. Brown

UWA Business School, M250; Financial Research Network (FIRN)

Janice C. Y. How

Queensland University of Technology; Financial Research Network (FIRN)

Kadir J.P. Lim

Curtin University - School of Economics and Finance

Date Written: Undated

Abstract

Dividends have direct cash flow implications for firms and investors, and are important for signaling reasons. Consequently, investors, analysts, and managers typically forecast future dividends and report them in various ways. We examine the accuracy of consensus dividend forecasts of Australian sell-side financial analysts published by BARCEP between 1985 and 1998. Although analysts' dividend forecasts are optimistically biased, we find they are less biased and more accurate than their earnings counterparts. Forecast accuracy is positively correlated with proxies for the amount of information available about the firm and negatively correlated with proxies for the level of uncertainty about its future operating performance. These proxy variables and other variables that control for institutional change, notably occasioned by amendments to the Australian Corporations Law, explain 10 to 15 per cent of the cross-sectional variation in the accuracy of analysts' dividend forecasts over the period 1991-1998, which is about half the explanatory power of a similar model fitted to BARCEP consensus earnings forecasts.

Keywords: security analysts, dividends, earnings, forecasts, accuracy, bias

JEL Classification: G15, G29, G35, G38, M40

Suggested Citation

Clarke, Alex and Brown, Philip R. and How, Janice C. Y. and Lim, Kadir J.P., Analysts' Dividend Forecasts (Undated). Available at SSRN: https://ssrn.com/abstract=314120 or http://dx.doi.org/10.2139/ssrn.314120

Alex Clarke

The University of Western Australia - Department of Accounting and Finance ( email )

School of Business
35 Stirling Highway
Crawley, Western Australia 6009
Australia
+61 8 9380 2902 (Phone)
+61 8 9380 1047 (Fax)

Philip R. Brown

UWA Business School, M250 ( email )

Crawley, Western Australia 6009
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Janice C. Y. How (Contact Author)

Queensland University of Technology ( email )

2 George Street
Brisbane, Queensland 4000
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Kadir J.P. Lim

Curtin University - School of Economics and Finance ( email )

GPO Box U 1987
Perth, Western Australia 6845
Australia

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