An Empirical Analysis of Analysts' Cash Flow Forecasts

Posted: 29 Jan 2003

See all articles by Mark L. DeFond

Mark L. DeFond

University of Southern California - Leventhal School of Accounting; European Corporate Governance Institute (ECGI)

Mingyi Hung

Hong Kong University of Science & Technology (HKUST)

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Abstract

This study investigates the relatively recent and growing trend in analysts disseminating operating cash flow forecasts. Consistent with our expectations, we find that analysts tend to forecast cash flows for firms where accounting, operating and financing characteristics suggest that cash flows are likely to be useful in interpreting earnings and assessing firm viability. Specifically, we find that analysts tend to forecast cash flows for firms with (1) large accruals, (2) more heterogeneous accounting choices relative to their industry peers, (3) high earnings volatility, (4) high capital intensity, and (5) poor financial health. These findings are consistent with financial analysts responding to market-based incentives to provide market participants with value-relevant information.

Keywords: analysts' forecasts, cash flows, earnings' usefulness

JEL Classification: G29, G12, M41, N20

Suggested Citation

DeFond, Mark and Hung, Mingyi, An Empirical Analysis of Analysts' Cash Flow Forecasts. Available at SSRN: https://ssrn.com/abstract=374961

Mark DeFond

University of Southern California - Leventhal School of Accounting ( email )

Accounting Building, Room 206
Los Angeles, CA 90089-0441
United States
213-740-5016 (Phone)
213-747-2815 (Fax)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Mingyi Hung (Contact Author)

Hong Kong University of Science & Technology (HKUST) ( email )

Clearwater Bay
Kowloon, 999999
Hong Kong

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