The Quality of Analysts' Cash Flow Forecasts

49 Pages Posted: 12 May 2008

See all articles by Dan Givoly

Dan Givoly

Pennsylvania State University, Smeal College of Business

Carla Hayn

University of California at Los Angeles - Anderson School of Management

Reuven Lehavy

University of Michigan, Stephen M. Ross School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: May 2008

Abstract

This paper examines properties of analysts' cash flow forecasts and compares these properties with those exhibited by analysts' earnings forecasts. Our results indicate that analysts' cash flow forecasts are of a considerable lower quality than their earnings forecasts. They are less accurate and improve at a slower rate during the forecast period. Further, analysts' cash flow forecasts appear to be, in essence, a naïve extension of their earnings forecasts and provide no incremental information on expected changes in firms' working capital. Consistent with their low quality and in contrast to their earnings forecasts, analysts' forecasts of cash flows are of limited information content and are only weakly associated with stock price movements. Finally, a measure of expected accruals based on the difference between analysts' earnings and cash flow forecasts has a very low power in detecting earnings management.

JEL Classification: M41, M43, G29

Suggested Citation

Givoly, Dan and Hayn, Carla and Lehavy, Reuven, The Quality of Analysts' Cash Flow Forecasts (May 2008). Available at SSRN: https://ssrn.com/abstract=1130907 or http://dx.doi.org/10.2139/ssrn.1130907

Dan Givoly (Contact Author)

Pennsylvania State University, Smeal College of Business ( email )

305 Business Building
University Park, PA 16802
United States
814-865-0587 (Phone)
814-863-8393 (Fax)

Carla Hayn

University of California at Los Angeles - Anderson School of Management ( email )

D410 Anderson Complex
Los Angeles, CA 90095-1481
United States
310-206-9225 (Phone)

Reuven Lehavy

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI 48109
United States
734-763-1508 (Phone)
734-936-0282 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
685
Abstract Views
3,334
rank
25,594
PlumX Metrics