Are Analysts’ Cash Flow Forecasts Useful?

Accounting and Finance, Forthcoming

48 Pages Posted: 25 Nov 2014 Last revised: 5 Mar 2015

Date Written: November 23, 2014

Abstract

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.

Keywords: Analysts’ Cash Flow Forecasts, Cost of Capital

JEL Classification: G24, G30

Suggested Citation

Jung, Sung Hwan, Are Analysts’ Cash Flow Forecasts Useful? (November 23, 2014). Accounting and Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2529808

Sung Hwan Jung (Contact Author)

University of Suwon ( email )

Suwon-City, Gyeonggi
United States

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