Do Analysts' Cross‐year Revisions Contain Information about Audit Adjustment? Evidence from the Chinese Capital Market. (31st July 2021)

• Record Type: Journal Article
• Authors: Chen, Songsheng; Tian, Zhili; Liu, Qingqing
• Is Part Of: Asia-Pacific journal of financial studies. Volume 50:Number 4(2021)
• Page Start: 391
• Page End: 415
• Publication Date: 2021-07-31
• Subjects: Analyst -- Audit adjustment -- Cross‐year revision -- Earnings forecast -- Information content; Pacific Area -- Economic conditions -- Periodicals; Finance -- Asia -- Periodicals; Finance -- Pacific Area -- Periodicals; Asia -- Economic conditions -- Periodicals; 332.09505
• DOI: 10.1111/ajfs.12344
• Languages: English
• ISSNs: 2041-9945

Abstract

Abstract: This study tests the information content of changes in analysts' earnings forecasts. Using audit adjustment data from China, this study investigates whether changes in analysts' cross‐year forecast revisions reflect audit information. The results show that the cross‐year revision of analysts' earnings per share forecasts is positively related to the magnitude of audit adjustment, which may be mainly due to analysts' communication with management. Furthermore, analysts who display higher forecast frequency, who issue their last forecast closer to the day the annual report is announced, or who show better forecast performance reflect a greater amount of audit information in their cross‐year forecast revisions.