 Do Analysts Disclose Cash Flow Forecasts with Earnings Estimates when Earnings Quality is Low?Pawel Bilinski Journal of Business Finance & Accounting, 2014, vol. 41, issue 3-4, 401-434 Abstract: Cash flows are incrementally useful to earnings in security valuation mainly when earnings quality is low. This suggests that when earnings quality decreases, analysts will be more likely to supplement their earnings forecasts with cash flow estimates. Contrary to this prediction, we find that analysts do not disclose cash flow forecasts when the quality of earnings is low. This is because cash flow forecast accuracy depends on the accuracy of the accrual estimates and the precision of accrual forecasts decreases for firms with low quality earnings. Consequently, as earnings quality decreases, cash flow forecasts become increasingly inaccurate compared to earnings estimates. Cash flow estimates that lack reliability are not useful to investors and, consequently, unlikely to be reported by analysts. This result provides an explanation for why analysts are less likely to report cash flow estimates when earnings quality is low. Date: 2014 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:jbfnac:v:41:y:2014:i:3-4:p:401-434 Ordering information: This journal article can be ordered from Access Statistics for this article Journal of Business Finance & Accounting is currently edited by P. F. Pope, A. W. Stark and M. Walker More articles in Journal of Business Finance & Accounting from Wiley Blackwell |
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