Are analysts' cash flow forecasts useful?. (3rd March 2015)

• Record Type: Journal Article
• Authors: Jung, Sung Hwan; Cahan, Steven
• Is Part Of: Accounting and finance. Volume 55:Number 3(2015:Sep.)
• Page Start: 825
• Page End: 859
• Publication Date: 2015-03-03
• Subjects: Accounting -- Periodicals; Finance -- Periodicals; 657.05
• DOI: 10.1111/acfi.12103
• Languages: English
• ISSNs: 0810-5391

Abstract

<abstract abstract-type="main" id="acfi12103-abs-0001"> <title>Abstract</title> <p>This study provides evidence that the cost of equity capital decreases with the number of analysts who issue both cash flow and earnings forecasts (cash analysts). The evidence also shows that cash analysts reduce information asymmetry and predict long‐term earnings more accurately than analysts who issue only earnings forecasts. Taken together, these findings suggest that cash analysts provide market participants with high‐quality information and, as a result, firms benefit from cash analyst coverage in the form of a reduced cost of equity capital.</p> </abstract>