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Disclosure Practices, Enforcement of Accounting Standards and Analysts' Forecast Accuracy: An International Study

55 Pages Posted: 22 Jan 2003  

Ole-Kristian Hope

University of Toronto - Rotman School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: November 20, 2002

Abstract

Using a sample from 22 countries, I investigate the relations between the accuracy of analysts' earnings forecasts and the level of annual report disclosure; and between forecast accuracy and the degree of enforcement of accounting standards. I document that firm-level disclosures are positively related to forecast accuracy, suggesting that such disclosures provide useful information to analysts. I construct a comprehensive measure of enforcement and find that strong enforcement is associated with higher forecast accuracy. This finding is consistent with the hypothesis that enforcement encourages managers to follow prescribed accounting rules, which, in turn, reduces analysts' uncertainty about future earnings. I also find evidence consistent with disclosures being more important when analyst following is low and with enforcement being more important when more choice among accounting methods is allowed.

Keywords: disclosures, enforcement, financial analysts, forecast accuracy, international

JEL Classification: M41, M45, G14, G15, G29

Suggested Citation

Hope, Ole-Kristian, Disclosure Practices, Enforcement of Accounting Standards and Analysts' Forecast Accuracy: An International Study (November 20, 2002). Available at SSRN: https://ssrn.com/abstract=353160 or http://dx.doi.org/10.2139/ssrn.353160

Ole-Kristian Hope (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

HOME PAGE: http://www.rotman.utoronto.ca/FacultyAndResearch/Faculty/FacultyBios/Hope.aspx

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