The Timeliness of Analysts' Earnings Forecasts and the Cost of Capital

26 Pages Posted: 13 Jun 2013 Last revised: 16 Jul 2013

See all articles by Andrew B. Jackson

Andrew B. Jackson

UNSW Australia Business School, School of Accounting

Grace Wang

Independent

Date Written: June 11, 2013

Abstract

We empirically examine the associations between the cost of capital and the timeliness of analysts' earnings forecasts, as a proxy for disclosure precision. We document that as the precision of the information increases so does the cost of capital, consistent with prior research showing more timely disclosures are positively associated with the cost of capital, and that the precision of disclosure widens the information gap between informed and uninformed investors in an imperfect market. We also find that at a certain point, more timely analysts' forecasts are not positively associated with the cost of capital, although the relation is mixed.

Keywords: Cost of Capital, Timeliness, Analysts

Suggested Citation

Jackson, Andrew B. and Wang, K. H., The Timeliness of Analysts' Earnings Forecasts and the Cost of Capital (June 11, 2013). UNSW Australian School of Business Research Paper No. 2013 ACCT 02, Available at SSRN: https://ssrn.com/abstract=2277940 or http://dx.doi.org/10.2139/ssrn.2277940

Andrew B. Jackson (Contact Author)

UNSW Australia Business School, School of Accounting ( email )

Sydney, NSW 2052
Australia

K. H. Wang

Independent ( email )

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