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Author: Huong N. Higgins
Publisher:
ISBN:
Category :
Languages : en
Pages : 38
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Book Description
This paper examines analyst forecasts of Japanese firms' earnings during Japan's economic burst period in the 1990s. Using the evidence of analyst earnings forecasts in the U.S. as benchmark, the paper documents the following three findings. First, whereas the forecast accuracy of U.S. analysts following U.S. firms improves over time, the forecast accuracy of U.S. and Japanese analysts following Japanese firms does not. Second, whereas decreases in forecast errors of U.S. analysts following U.S. firms are best explained by decreases in forecast bias of the analysts, increases in forecast errors of U.S. and Japanese analysts following Japanese firms are best explained by increases in the frequency of losses experienced by Japanese firms. Third, Japanese analysts forecast earnings less accurately than do U.S. analysts. These findings reflect the difficulty of producing accurate earnings forecasts during economic downturns. These findings also suggest that Japanese analysts are more bound than their U.S. counterparts by cultural ties that impede forecast accuracy.
Author: Huong N. Higgins
Publisher:
ISBN:
Category :
Languages : en
Pages : 38
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Book Description
This paper examines analyst forecasts of Japanese firms' earnings during Japan's economic burst period in the 1990s. Using the evidence of analyst earnings forecasts in the U.S. as benchmark, the paper documents the following three findings. First, whereas the forecast accuracy of U.S. analysts following U.S. firms improves over time, the forecast accuracy of U.S. and Japanese analysts following Japanese firms does not. Second, whereas decreases in forecast errors of U.S. analysts following U.S. firms are best explained by decreases in forecast bias of the analysts, increases in forecast errors of U.S. and Japanese analysts following Japanese firms are best explained by increases in the frequency of losses experienced by Japanese firms. Third, Japanese analysts forecast earnings less accurately than do U.S. analysts. These findings reflect the difficulty of producing accurate earnings forecasts during economic downturns. These findings also suggest that Japanese analysts are more bound than their U.S. counterparts by cultural ties that impede forecast accuracy.
Author: Koji Ota
Publisher:
ISBN:
Category :
Languages : en
Pages : 26
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Book Description
The effectively mandatory provision of management earnings forecasts (MEF) is an unique feature of Japan's financial disclosure system. The first objective of this study is to identify the determinants of systematic bias in MEF using a sample of nearly 25,000 one-year-ahead earnings forecasts announced by Japanese firms at the beginning of a fiscal year over the period 1979-1999. The examination of ex post management forecast errors shows that financial distress, firm growth, firm size, and prior forecast errors are all associated with bias in MEF. The second objective of this study is to investigate whether analysts are aware of these factors that are related to systematic bias in MEF. The examination of analysts' forecasts issued subsequent to the announcement of management forecasts reveals that analysts take these factors into consideration when they issue their own earnings forecasts. These findings indicate that analysts are well aware of the determinants of systematic bias in MEF and make correct adjustments that lead to the higher accuracy of analysts' forecasts than management forecasts.
Author: Edward B. Douthett
Publisher:
ISBN:
Category :
Languages : en
Pages : 34
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Book Description
This study examines differences in the characteristics of analysts' forecasts of earnings for keiretsu and non-keiretsu firms in Japan. Japanese industrial organization is characterized by enterprise groupings, keiretsu, composed of firms in different industries, but interrelated through cross-holdings of ownership. The strong interrelations of the Japanese keiretsu have been shown to increase the monitoring of managerial performance. An alternative view of keiretsu stewardship suggests the exclusionary environment within a keiretsu creates an information monopoly, resulting in greater information asymmetry between inside and outside constituents. These two views provide opposing predictions on how keiretsu groupings potentially affect the characteristics of earnings forecasts made by analysts: increased monitoring will improve the forecast characteristics of earnings, while the opposite is true under an information monopoly. Our results suggest that forecast accuracy (dispersion) is higher (lower) for keiretsu firms than non-keiretsu firms, supporting a monitoring role by keiretsu. The results also show that keiretsu firms' forecast characteristics are related to the strength of the keiretsu relationship, providing further evidence that it is indeed the keiretsu relationship that increases the monitoring of management, which ultimately improves the accuracy and dispersion of analysts' forecast.
Author: Tetsuo Hayashi
Publisher:
ISBN:
Category :
Languages : en
Pages : 204
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Book Description
Author: Zhengwei Ma
Publisher:
ISBN:
Category : Earnings per share
Languages : en
Pages : 82
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Author: Robert M. Conroy
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ISBN:
Category : Stock exchanges
Languages : en
Pages : 20
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Book Description
Author: Masako N. Darrough
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ISBN:
Category : Corporate profits
Languages : en
Pages : 80
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Book Description
Author: Don Herrmann
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Category :
Languages : en
Pages :
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Book Description
Our broad research objective is to investigate whether convergence towards international standards improves the decision usefulness of information. Recent changes in Japanese consolidated reporting practices to better align with international standards provide an excellent setting to investigate this research objective. Specifically, we examine the effect of changes in Japanese consolidation policy on financial analysts' perceptions of the persistence of subsidiary earnings. Previous research provides evidence that, prior to the change in consolidation policy, consolidated financial information was not used efficiently in the Japanese capital market. Prior research finds a positive relation between subsidiary earnings and future stock returns in Japan, indicating that investors underestimate the persistence of subsidiary earnings. Consistent with prior research using stock returns, we find that financial analysts also underestimate the persistence of subsidiary earnings in Japan. We document a significant positive relation between subsidiary earnings and future forecast errors of consolidated earnings. However, following the changes in consolidation policy in Japan, we find that financial analysts no longer underestimate the persistence of subsidiary earnings. Changes in Japanese consolidation policy in conformance with international standards increase decision usefulness by improving the ability of financial analysts to predict overall firm performance. One limitation of our research design relates to the adoption of mandated accounting policy changes by all sample firms in the same calendar time. This makes it difficult to control for the impact of correlated omitted variables. While this concern can never be completely eliminated, we provide additional tests that examine sample partitions by firm size and industry. These additional tests support the primary findings that Japan's efforts to converge consolidation rules with international standards have improved analysts' consolidated earnings forecasts.
Author: Akihiro Yamada
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ISBN:
Category :
Languages : en
Pages :
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Book Description
Purpose: Current systems of regulation in Japan require that listed firms disclose earnings forecasts for the coming fiscal year. The Japanese Business Federation is contesting this requirement, requesting that mandatory forecast disclosures be abolished. The purpose of this study is to investigate the relationships (1) between accruals and initial management earnings forecast errors, and (2) between accruals and forecast revisions. Further, the study offers a preliminary discussion of the economic costs of mandatory earnings forecasting, with a specific focus on firms operating under conditions of uncertainty or facing difficulty in analyzing economic information.Design/Methodology/Approach: To investigate the relationship between accruals and management forecast errors (revisions), multiple regression models were designed using data covering the period between 2003 and 2013, pertaining to listed Japanese firms. A model developed by Dechow and Dichev (2002) was applied to estimate normal and abnormal accruals. Findings: I found a positive relationship between accruals and initial management earnings forecast errors, and a negative relationship between accruals and forecast revisions. Further, the relationship between accruals and management forecast errors (revisions) is more pronounced among firms operating in uncertain business environments or facing difficulty in analyzing economic information.Originality/Value: The study provides an important analysis of abnormal working capital accruals in relation to both initial management earnings forecast errors and forecast revisions. While total accruals or working capital accruals have been documented in prior studies in this regard, abnormal accruals have not. Furthermore, this study offers a preliminary discussion of the economic costs associated with earnings forecasting under conditions of mandatory disclosure. The economic impact of forecasting has not previously been addressed under either mandatory or voluntary conditions.
Author: Shota Otomasa
Publisher:
ISBN:
Category :
Languages : en
Pages : 52
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Book Description
This paper investigates whether and how Japanese firms use management earnings forecasts as a performance target for determining executive cash compensation. Consistent with the implications of the agency theory, we find that the sensitivity of executive cash compensation varies with the extent to which realized earnings exceed initial management forecasts. In particular, we find that the executive cash compensation is positively related to management forecast error (MFE) for a sample of Japanese firms comprising 15,941 firm-year observations from 2005 to 2013. Moreover, we show that the relationship between executive cash compensation and MFE strengthens (weakens) when current realized earnings exceed (fall short of) aggressive initial forecasts. In additional analysis, we find that pay-for-performance sensitivity is weaker for extremely positive MFEs due to the ceiling on total cash compensation. Overall, we find that initial management forecasts can be used as a performance target in executive compensation contracts. These findings also suggest that management earnings forecasts are important for improving contract efficiency as well as for providing useful information to investors in the capital market.
