Other comprehensive income, its components, and analysts’ forecasts

Joshua Anderson, Yiting Cao (), Edward J. Riedl and Scarlett Xiaotong Song
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Joshua Anderson: California Polytechnic State University
Yiting Cao: California State University Los Angeles
Edward J. Riedl: Boston University
Scarlett Xiaotong Song: University of New Hampshire

Review of Accounting Studies, 2023, vol. 28, issue 2, No 12, 792-826

Abstract: Abstract This paper examines how analysts incorporate other comprehensive income (OCI) and its components into their earnings forecasts. We first document that analysts’ 1-year-ahead earnings forecasts are associated with OCI and OCI components having predictive ability; this suggests analysts (at least partially) incorporate this information into their forecasting. We then show that analysts are neither complete nor timely in incorporating OCI information into their forecasts, as several OCI components remain associated with analysts’ forecast errors. Further, we document that higher uncertainty in firm performance exacerbates analysts’ underreaction, evidencing a friction to full incorporation of OCI-related information. Finally, as evidence of where and when analysts derive OCI-related information, we document that analysts’ forecast revisions correlate with the release of firms’ 10-Ks and early 10-Qs (i.e., quarters one and two but not three).

Keywords: Other comprehensive income; Analyst forecasts; Uncertainty; G38; M41; M48 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s11142-021-09656-y

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