The Persistence and Forecast Accuracy of Earnings Components in the USA and Japan PDF Download
Are you looking for read ebook online? Search for your book and save it on your Kindle device, PC, phones or tablets. Download The Persistence and Forecast Accuracy of Earnings Components in the USA and Japan PDF full book. Access full book title The Persistence and Forecast Accuracy of Earnings Components in the USA and Japan by Don Herrmann. Download full books in PDF and EPUB format.
Author: Don Herrmann
Publisher:
ISBN:
Category :
Languages : en
Pages :
Get Book Here
Book Description
Not all components of earnings are expected to provide similar information regarding future earnings. For example, basic financial statement analysis indicates that the persistence of ordinary income should be greater than the persistence of special, extraordinary, or discontinued operations. Because the market assigns higher multiples to earnings components that are more persistent, differentiating earnings components on the basis of relative persistence would appear to be useful. A focus on relative predictive value is consistent with research findings and user recommendations on separating earnings components that are persistent or permanent from those that are transitory or temporary. This paper examines the persistence and forecast accuracy of earnings components for retail and manufacturing companies listed in the world's two largest equity markets; the USA and Japan. We find the forecast accuracy of earnings in both the USA and Japan increases with greater disaggregation of earnings components. The results further indicate that the improvements in forecast accuracy due to earnings disaggregation are greater in the USA than in Japan. The greater emphasis and more detailed guidelines for reporting earnings components in the USA produce a better differentiation in the persistence of earnings components resulting in greater forecast improvements from earnings disaggregation.
Author: Don Herrmann
Publisher:
ISBN:
Category :
Languages : en
Pages :
Get Book Here
Book Description
Not all components of earnings are expected to provide similar information regarding future earnings. For example, basic financial statement analysis indicates that the persistence of ordinary income should be greater than the persistence of special, extraordinary, or discontinued operations. Because the market assigns higher multiples to earnings components that are more persistent, differentiating earnings components on the basis of relative persistence would appear to be useful. A focus on relative predictive value is consistent with research findings and user recommendations on separating earnings components that are persistent or permanent from those that are transitory or temporary. This paper examines the persistence and forecast accuracy of earnings components for retail and manufacturing companies listed in the world's two largest equity markets; the USA and Japan. We find the forecast accuracy of earnings in both the USA and Japan increases with greater disaggregation of earnings components. The results further indicate that the improvements in forecast accuracy due to earnings disaggregation are greater in the USA than in Japan. The greater emphasis and more detailed guidelines for reporting earnings components in the USA produce a better differentiation in the persistence of earnings components resulting in greater forecast improvements from earnings disaggregation.
Author: Robert M. Conroy
Publisher:
ISBN: 9780943205274
Category : Corporate profits
Languages : en
Pages : 59
Get Book Here
Book Description
Author: Huong N. Higgins
Publisher:
ISBN:
Category :
Languages : en
Pages : 38
Get Book Here
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: Gary K. Meek
Publisher: Edward Elgar Publishing
ISBN:
Category : Business & Economics
Languages : en
Pages : 724
Get Book Here
Book Description
Twenty-eight articles reprinted in facsimile from journals such as Accounting Review and Accounting Horizons consider the relationships between accounting regulation and policy choice, with specific studies of the United Sates, Canada, Mexico, China, Japan, and other Asian countries. Covering the pe
Author:
Publisher:
ISBN:
Category : Accounting
Languages : en
Pages : 478
Get Book Here
Book Description
Author: Tomomi Takada
Publisher:
ISBN:
Category :
Languages : en
Pages :
Get Book Here
Book Description
We examine the relation between the quality of financial inputs (indirectly measured by the existence or otherwise of restatements of the condensed financial statements), and management forecast accuracy in Japan. The Japanese market provides a unique environment to identify firms with poor-quality financial inputs because the stock exchanges require firms simultaneously to disclose (1) condensed financial statements for the current year and (2) management forecasts for the following year in their financial highlights (Kessan Tanshin) after the settlement of financial accounts and board approval before the final financial statements are issued. The simultaneous disclosure of management forecasts and earnings announcements implies that the firms that have restated their financial highlights are relying on poor-quality financial inputs to generate the statements and, most likely, the earnings forecast, as well. Our results suggest that restatement firms are likely to use poor-quality financial inputs and consequently report less accurate management forecasts.
Author: Brian Michael Bratten
Publisher:
ISBN:
Category :
Languages : en
Pages : 198
Get Book Here
Book Description
This dissertation examines the general research issue of whether the components of earnings are informative and specifically 1) how analysts consider earnings components when predicting future earnings and 2) whether the information content in, and analysts' use of, earnings components have changed through time. Although earnings components have predictive value for future earnings based on each component's persistence, extant research provides only a limited understanding of whether and how analysts consider this when forecasting. Using an integrated income statement and balance sheet framework to estimate the persistence of earnings components, I first establish that disaggregation based on the earnings components framework in this study is helpful to predict future earnings and helps explains contemporaneous returns. I then find evidence suggesting that although analysts consider the persistence of various earnings components, they do not fully integrate this information into their forecasts. Interestingly, analysts appear to be selective in their incorporation of the information in earnings components, seeming to ignore information from components indicating lower persistence, which results in higher forecast errors. Conversely, when a firm's income is concentrated in high persistence items, analysts appear to incorporate the information into their forecasts, reducing their forecast errors. I also report that the usefulness of components relative to aggregate earnings has dramatically and continuously increased over the past several decades, and contemporaneous returns appear to be much better explained by earnings components than aggregate earnings (than historically). Finally, the relation between analyst forecast errors and the differential persistence of earnings components has also declined over time, indicating that analysts appear to recognize the increasing importance of earnings components through time.
Author: Andrew Schmidt
Publisher:
ISBN:
Category :
Languages : en
Pages :
Get Book Here
Book Description
I examine whether earnings generated by changes in effective tax rates (the tax change component) persist and aid in forecasting future earnings. In addition, this study investigates to what extent investors incorporate the forecasting implications of the tax change component of earnings into stock prices. I find that there is a positive, significant association between the tax change component of earnings and future earnings. I use the interim reporting requirements of APB No. 28 (APB 1973) and FASB Interpretation No. 18 (FASB 1977) to further decompose the tax change component into an initial and a revised portion based on the first quarter estimate of the annual ETR. I find that the initial tax change component is more persistent for future earnings than the revised tax change component. These results are consistent with my hypotheses that the initial and revised tax change components have differential persistence and forecasting implications, and dispute the broad notion advanced by prior literature that ETR-related earnings changes are transitory. Results from market tests indicate that the market underweights the forecasting implications of the tax change component and the mispricing appears to be driven by the transitory nature of the revised tax change component.
Author: Andrew Stotz
Publisher:
ISBN:
Category :
Languages : en
Pages : 122
Get Book Here
Book Description
Over the past 12 years, financial analysts across the world have been optimistically wrong with their 12-month earnings forecasts by 25.3%. This study may be the first of its kind to assess analyst earnings forecast accuracy at all listed companies across the globe, covering 70 countries. A review of prior research shows little uniformity in the preparation of the data set, yet differences in how outliers are treated, for example, can create substantially different results. This research lays out six specific steps to prepare the data set before any analysis is done.Three main conclusions come from this research: First, analyst earnings forecasts globally were 25.3% optimistically wrong, meaning on average, analysts started each year forecasting company profits of US$125, but 12 months later that company reported profits of US$100. Second, analysts had a harder time forecasting earnings for companies in emerging markets, where they were 35% optimistically wrong. Third, that analyst optimism mainly occurred when the companies they forecasted experienced very low levels of actual earnings growth, analysts did not make an equal, but opposite error for fast growth companies.
Author:
Publisher:
ISBN:
Category : Business
Languages : en
Pages : 1916
Get Book Here
Book Description
