Accounting Policy Disclosures and Analysts' Forecasts

Ole†Kristian Hope

Contemporary Accounting Research, 2003, vol. 20, issue 2, 295-321

Abstract: Using an international sample, I investigate whether the extent of firms' disclosure of their accounting policies in the annual report is associated with properties of analysts' earnings forecasts. Controlling for firm†and country†level variables, I find that the level of accounting policy disclosure is significantly negatively related to forecast dispersion and forecast error. In particular, I find that accounting policy disclosures are incrementally useful to analysts over and above all other annual report disclosures. These findings suggest that accounting policy disclosures reduce uncertainty about forecasted earnings. I find univariate but not multivariate support for the hypothesis that accounting policy disclosures are especially helpful to analysts in environments where firms can choose among a larger set of accounting methods.

Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:wly:coacre:v:20:y:2003:i:2:p:295-321

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