Financial Statement Analysis and Earnings Forecasting

Steven J. Monahan

Foundations and Trends(R) in Accounting, 2018, vol. 12, issue 2, 105-215

Abstract: I synthesize and discuss academic research on financial statement analysis and earnings forecasting. I begin by discussing analytical and empirical evidence that shows that earnings, not dividends or free cash flows, are the payoffs that investors forecast when estimating value. This result is fundamental and it provides clear motivation for studying earnings forecasting and the role that historical accounting numbers play in the earnings-forecasting process. I then provide a detailed discussion of the research design choices that are made when developing and evaluating an earnings-forecasting approach. I describe the tradeoffs involved when making these choices and I review the extant empirical literature. An overarching theme of this discussion is that there are substantial research opportunities.

Keywords: Corporate governance; Managerial behavior; Stakeholders; Accounting research (search for similar items in EconPapers)
JEL-codes: M41 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (6)

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