On the Use of Intra-Industry Information to Improve Earnings Forecasts

We investigate whether earnings forecasts are improved by earlier earnings disclosures by firms in the same industry. We find improvements for time series forecasts, but not for analysts' forecasts. Considering prior earnings announcements reduces correlations between forecast errors and security price reactions to earnings announcements, even when incorporating these announcements improves forecast accuracy. Our explanation for this anomaly, which is supported by additional analysis, is that intra-industry information facilitates predicting transitory, rather than permanent, earnings components. The question of whether information transfers improve earnings forecasts provides the context for the analysis, but the primary contribution is the documentation of intra-industry information transfers in a setting other than capital markets.     

An Empirical Analysis of Qualitative Management Earnings Forecasts

Despite efforts by the Securities and Exchange Commission (SEC) to encourage corporate disclosure of quantitative management earnings projections, only a small fraction of firms voluntarily do so. Instead of quantitative estimates, a large number of firms choose to disclose qualitative (verbal) assessments of their earnings prospects. This paper is a study of the information characteristics and the usefulness of this alternative form of forecast disclosure to investors. The study examines a sample of qualitative forecast statements from the 1979–1985 period and finds associations between these forecasts and percentage changes in realized earnings per share, the direction of financial analysts' forecast revisions following the disclosure of these forecasts, and abnormal stock returns on the date of their disclosure. These associations are, however, shown to be more significant for negative (bad news) than for positive (good news) forecasts.     

Evidence That Management Earnings Forecasts Do Not Fully Incorporate Information in Prior Forecast Errors

Abstract:  This paper investigates whether managers fully incorporate the implications of their prior earnings forecast errors into their future earnings forecasts and, if not, whether this behavior is related to the post-earnings announcement drift. I find a positive association in consecutive management forecast errors, suggesting that managers underestimate the future implications of past earnings information when forecasting earnings. I also find that managers underestimate the information in their prior forecast errors to a greater extent when they make earnings forecasts with a longer horizon. Finally, I find that, similar to managers, the market also underreacts to earnings information in management forecast errors, which leads to predictable stock returns following earnings announcements.     

A Comparative Analysis of Earnings Forecasts in Europe

This study examines the accuracy and bias of financial analysts' EPS forecasts in nine European countries during 1987 to 1995. There are significant differences between the countries which may be due to the differences in earnings behaviour, accounting practices, and the influence of securities markets. An optimistic bias is endemic in European forecasts, consistent with research from the US. Investors who incorporate earnings forecasts in their stock selection procedures may be able to improve returns by explicitly adjusting their models for observed regularities in earnings forecast errors. However, we have shown that these regularities differ in incidence and magnitude across the countries studied, and further research is needed to effectively model these differences.     

An Empirical Analysis of the Bias and Rationality of Profit Forecasts Published in New Issue Prospectuses

Our study sets out to assess the accuracy of profit forecasts made by IPOs in Hong Kong. We use a variety of measures and tests to examine the accuracy, bias, rationality, and superiority of earnings estimates. The results show that forecast accuracy compares favourably with the findings from the developed economies of Australia, Britain, Canada, and New Zealand. Forecasts are shown to be superior to the predictions from time series models. IPOs tend to underforecast in the sense that actual profits exceed the forecasts. The rationality tests show mixed results. Cross-sectional analyses of forecast accuracy have poor explanatory power although the Big Six reporting accountants are associated with smaller forecast errors.     

An Empirical Analysis of the Bias and Rationality of Profit Forecasts Published in New Issue Prospectuses

Our study sets out to assess the accuracy of profit forecasts made by IPOs in Hong Kong. We use a variety of measures and tests to examine the accuracy, bias, rationality, and superiority of earnings estimates. The results show that forecast accuracy compares favourably with the findings from the developed economies of Australia, Britain, Canada, and New Zealand. Forecasts are shown to be superior to the predictions from time series models. IPOs tend to underforecast in the sense that actual profits exceed the forecasts. The rationality tests show mixed results. Cross-sectional analyses of forecast accuracy have poor explanatory power although the Big Six reporting accountants are associated with smaller forecast errors.     

The Relevance of Analysts' Earnings Forecasts in Japan

Abstract:   This study examines the role of financial analysts in equity valuation in Japan by comparing the relevance of financial analysts' earnings forecasts, over financial statement information, to investors' decisions. We find that the value‐relevance of a set of accounting variables is very modest, but the incremental contribution of analysts' forecasts is very significant. This is in line with the expectation that the skill and expertise of analysts are more valuable in markets with poor financial disclosure, such as Japan. We also find that the importance of the financial statements increases over time while the importance of the analysts' forecasts does not change. We also provide evidence of the effect of Japanese corporate groupings, keiretsu, on the informativeness of accounting signals and earnings forecasts. The results show that the contribution of accounting variables to valuation is lower for keiretsu firms, which supports the exclusionary hypothesis that companies which are a part of keiretsu, disclose less information than do non‐keiretsu companies. The analysts' forecasts are equally important for investors in both types of firms.     

Cost and Profit Efficiency of the Turkish Banking Industry: An Empirical Investigation

By employing a stochastic frontier approach, we examine the effect of bank size, corporate control, and governance, as well as ownership, on the cost (input) and alternative profit (input-output) efficiencies of Turkish banks. We find that the average profit efficiency is 84% for Turkish banks. The oligopolistic nature of the Turkish banking industry has contributed to less than optimal competition in the loan market and deposit markets. Our results indicate that the degree of linkage between cost and profit efficiency is significantly low. This suggests that high profit efficiency does not require greater cost efficiency in Turkey, and that cost in efficient banks can continue to survive in this imperfect market, where profit opportunities are abundant for all types and sizes of banks. Accordingly, our results indicate that the different sizes of banks have capitalized these opportunities equivalently.     

Decentralization,Economic Development,and Growth in Turkish Provinces

There have been important developments in the decentralization of the government structure in Turkey since the early 1980s. This paper examines economic development and growth in Turkish provinces. It first discusses local government reforms throughout the history of Turkey with the focus on recent reform efforts. It then empirically analyzes the effects of recent decentralization reforms in Turkish provinces using cross-sectional and panel data approaches as well as spatial econometrics. The panel data set consists of sixty-seven provinces from 1976 to 2001. Using the number of local governments per capita and number of local governments per square kilometer of land to indicate decentralization, the analysis examines whether variations in local decentralization across these provinces and across time have significantly affected economic development and growth in those provinces. The findings suggest a weak negative economic effect of decentralization through a number of municipalities per capita. However, the findings do not show any significant effect from the creation of new provinces by separation from the existing ones.     

从业绩预告违规看中国证券监管的处罚效果

依托中国特殊的强制性业绩预告制度,考察证券监管的处罚行为能否显著降低上市公司发生业绩预告违规的概率。基于2002～2008年年报业绩预告的大样本检验表明,与业绩预告违规有关的处罚或与其他违规有关的处罚都没有发挥降低后续业绩预告违规概率的作用,监管处罚的效果并不理想。     

Improving the Precision of Analysts' Earnings Forecasts by Adjusting for Predictable Bias

This research demonstrates that publicly-available information can be used to develop estimates of analysts' optimistic bias in earnings forecasts. These bias estimates can be used to produce more accurate forecasts, resulting in significant reductions of both cross-sectional mean forecast error and error variance. When bias estimates are based on past observations of forecast error alone, however, reductions in mean forecast error are smaller, and forecast precision is unimproved. Further tests provide evidence of a significant association between returns and the bias predictable from contemporaneously-available information, suggesting that predictable bias is only partially discounted by market participants. This study has significant implications for researchers and investors. The pricing of predictable bias in analysts' forecasts may add error toinferences which are based on the association between returns and analyst forecast errors, and knowledge of the market's partial discounting of predictable bias may help investors to make more efficient resource allocations.     

Analysts Earnings Forecasts and the Roles of Earnings and Book Value in Equity Valuation

This study examines the effect of the degree of association between current earnings and expected future earnings on the relative importance of earnings and book value for explaining equity price. Consensus analysts forecasts of one-year-ahead earnings are used to proxy for expected future earnings and are compared to reported current earnings to measure the degree of the association. We find that the value-relevance of current earnings negatively correlates with the extent to which consensus analysts forecasts deviate from current earnings. We also find that the incremental explanatory power of book value for equity price positively correlates with this measure. These results remain robust after controlling for factors known to be affecting the value-relevance of earnings such as negative earnings and the earnings-to-book ratio. Our results also show that this analysts' forecast-based measure of `earnings persistence' dominates historical earnings variance in explaining cross-sectional variations in the value-relevance of earnings and book value.     

The Quality of Analysts' Earnings Forecasts During the Asian Crisis: Evidence from Singapore

We bring together three disparate strands of literature to develop a comprehensive empirical framework to examine the efficiency of security analysts' earnings forecasts in Singapore. We focus specifically on how the increased uncertainty and the negative market sentiment during the period of the Asian crisis affected the quality of earnings forecasts. While we find no evidence of inefficiencies in the pre-crisis period, our results suggest that after the onset of the crisis, analysts (1) issued forecasts that were systematically upward biased; (2) did not fully incorporate the (negative) earnings-related news; and (3) predicted earnings changes which proved too extreme.     

Voluntary Disclosure of Profit Forecasts by Target Companies in Takeover Bids

This paper examines factors influencing voluntary forecast disclosure by target companies, whether good/bad news forecasts are disclosed and the influence of forecasts on the outcome of hostile bids. Disclosure was significantly more likely during contested bids. In agreed bids, probability of forecast disclosure was greater the shorter the bid horizon. In contested bids, forecasts were more likely where there were large block shareholdings, for larger targets and for targets in the capital goods industry. There was a clear tendency to disclose good news forecasts. A significant positive association between forecast disclosure and increase in offer price was found.     

Determinants of the Savings and Fixed Asset Holdings of Turkish Migrants in Germany

This paper investigates the determinants of the bank savings and fixed assets of Turkish migrants residing in Germany. We find that migrants with firmer roots in Germany are more likely to hold savings and fixed assets in Germany, and those with stronger links to Turkey are more likely to hold savings and fixed assets in Turkey. As expected, income is a positive determinant of savings and fixed assets in both countries. Although age has a positive impact on savings and fixed assets in Turkey, it has a negative impact on savings in Germany. These results shed new light on Turkish migrants' short- and long-term savings in Turkey and Germany.     

Efficiency, Ownership and Market Structure, Corporate Control and Governance in the Turkish Banking Industry

Turkish banks are quite heterogeneous in terms of organizational form, ownership structure, size, age, portfolio concentration, growth prospects and attitude toward risk. They also exhibit strong variations in performance as measured by several efficiency indices. In the light of theoretical advances in corporate finance and financial institutions, this paper is an in-depth cross-sectional analysis of the Turkish banking sector, which explores the various bank, market and regulatory characteristics that may explain the efficiency variations across banks. Consistent with the related hypotheses investigated, the results indicate that a number of independent bank characteristics are significantly correlated with various efficiency measures.     

The random-walk hypothesis revisited: new evidence on multiple structural breaks in emerging markets

We examine whether stock prices in 18 emerging markets follow random-walk or mean-reversion processes in the presence of sudden and gradual multiple structural breaks. Our tests endogenously determined the structural shifts and are more powerful than either the traditional random-walk (unit root) tests or the single structural break tests. In all emerging markets, we find strong evidence for multiple structural breaks. When we use single break tests, the random-walk hypothesis is rejected. However, when we use tests of double level shifts in the mean and make due allowance for multiple structural breaks, the results are consistent with the random-walk hypothesis in the vast majority of the sampled markets. The evidence proves robust to using price indexes whether denominated in U.S. dollars, in local currencies or in real terms, and also to using fractional integration tests. Our results contradict some previous studies for emerging markets which restrict structural breaks to only one-time shift.     

基于区域经济的公司绩效研究——对山东、浙江、广东上市公司的对比分析

上市公司通常被认为是区域的经济“领头羊”，其绩效表现也具有区域经济“晴雨表”效应。但山东板块、浙江板块和广东板块上市公司绩效与三省区域经济增长却呈现负相关关系。经济分权化及其企业行为异化导致了上市公司整体绩效弱势和“领头羊”效应缺失，而结构失衡是上市公司绩效与区域经济背离的关键因素。因此，优化上市公司股权结构和治理机制，调整上市公司的结构布局，保持上市公司与区域经济的动态平衡，是提升上市公司绩效，发挥其“晴雨表”效应的重要举措。     

Shock and Volatility Transmission in the Futures and Spot Markets: Evidence from Turkish Markets

This paper examines the volatility transmission mechanism between the futures and corresponding underlying asset spot markets, focusing on Turkish currency and stock index futures traded on the lately established Turkish Derivatives Exchange (TURKDEX). Employing multivariate generalized autoregressive conditional heteroskedasticity modeling, which allows for potential spillovers and asymmetries in the variance-covariance structure for the market returns, the paper investigates the volatility interactions among each of the three futures-spot market systems. For all market systems under study, the volatility spillovers are found to be important and bidirectional. For the stock index market system, in line with the previous literature, volatility shows asymmetric behavior and strong asymmetric shock transmission. The main implication is that investors need to account for volatility spillovers and asymmetries among the futures and the spot markets to correctly build hedging strategies.     

Back to Basics: Forecasting the Revenues of Internet Firms

This paper examines the roles played by past revenues, web usage data, and analysts in forecasting the future revenues of internet firms during the years 1998 to 2000. For this time period our analysis shows that estimates of web traffic growth have significant incremental value in the prediction of revenues above time-series forecasts. Furthermore, analysts almost always underestimate the revenues of internet firms. Historical revenue growth has incremental predictive power over analysts' forecasts for portal and content/community firms, but not for our e-tailer sample. Moreover, the stocks of the portal and content/community firms with high historical revenue growth earn higher abnormal returns during our sample period than do those with low historical growth. Estimates of web usage growth generally do not have incremental value over analysts' forecasts for predicting the revenues of either set of firms. However, perfect foreknowledge of actual web usage growth would provide incremental predictive power. Collectively, our findings point to the potential value for forecasting purposes of both improving upon the web usage estimates and obtaining more timely reports of actual web traffic.