The quality of analysts' cash flow forecasts

Dan Givoly, Carta Hayn, Reuven Lehavy

Research output: Contribution to journalArticle

68 Citations (Scopus)

Abstract

This study examines properties of analysts' cash flow forecasts and compares them to those exhibited by analysts' earnings forecasts. Our results indicate that analysts' cash flow forecasts are less accurate than analysts' earnings forecasts and improve at a slower rate during the forecast period. Further, cash flow forecasts appear to be a naive extension of analysts' earnings forecasts, thus providing limited information on expected changes in working capital. We also find that analysts' forecasts of cash flows are of limited information content and are only weakly associated with stock returns. Finally, estimating expected accruals as the difference between analysts' earnings forecasts and their cash flow forecasts does not result in a better detection of earnings management than achieved by commonly used accrual models.

Original languageEnglish (US)
Pages (from-to)1877-1911
Number of pages35
JournalAccounting Review
Volume84
Issue number6
DOIs
StatePublished - Nov 1 2009

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Analysts
Cash flow
Analysts' earnings forecasts
Limited information
Earnings management
Working capital
Stock returns
Information content
Analysts' forecasts
Accruals

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics

Cite this

Givoly, Dan ; Hayn, Carta ; Lehavy, Reuven. / The quality of analysts' cash flow forecasts. In: Accounting Review. 2009 ; Vol. 84, No. 6. pp. 1877-1911.
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The quality of analysts' cash flow forecasts. / Givoly, Dan; Hayn, Carta; Lehavy, Reuven.

In: Accounting Review, Vol. 84, No. 6, 01.11.2009, p. 1877-1911.

Research output: Contribution to journalArticle

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