Discussion of investor protection and analysts' cash flow forecasts around the world

• 成果类型: Editorial Material
• 署名作者: Hail, Luzi
• 署名单位: University of Pennsylvania
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-007-9025-4
• 发表日期: 2007
• 页码: 421-441
• 关键词: earnings management; UNITED-STATES; INFORMATION; FIRMS; determinants; incentives; disclosure; accuracy

摘要

DeFond and Hung [DeFond, M., & Hung, M. (2007). Review of Accounting Studies, 12 (this issue)] test the conjecture whether financial analysts, due to demand-side pressure, compensate for the limited usefulness of reported earnings by issuing cash flow forecasts. They find that analysts supplement their earnings forecasts more frequently with cash flow forecasts in countries where antidirector rights and legal enforcement quality are poor. In my discussion, I examine their hypothesis development and empirical research design and try to extend their arguments to a time-series setting. As it turns out, the paper's main contention critically hinges on two assumptions: (1) investors' unsatisfied demand for accounting information and (2) their willingness to rely on cash flow forecasts as valuable information signals. The descriptive validity of these assumptions in an international context is a priori not obvious. I then test whether substantial changes in investor protection and/or earnings quality relate to changes in the frequency of cash flow forecasts. My analyses show that analysts' propensity to issue cash flow forecasts increases after the first prosecution under insider trading laws, after non-U.S. firms have cross-listed their shares on a U.S. exchange, or after firms have voluntarily replaced their domestic accounting standards with IFRS or U.S. GAAP. Thus, I conclude that the reasoning behind the levels results does not simply extend to a changes setting.