Not all Analysts are Created Equal: Evidence from Seasoned Equity Offerings
When firms manage earnings, financial analysts must choose to include or exclude the managed component of earnings from their forecasts. Analysts are said to be informative if they exclude the managed component to forecast unmanaged (true) earnings. In contrast, they are said to be accurate if they...
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| Hauptverfasser: | , |
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| Format: | Article ou chapitre numérique |
| Sprache: | Français |
| Veröffentlicht: |
2025
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| Schlagworte: | |
| Online Zugang: | Accès Université d'Orléans et IFPM Accès Université d'Orléans et IFPM |
| Zusammenfassung: | When firms manage earnings, financial analysts must choose to include or exclude the managed component of earnings from their forecasts. Analysts are said to be informative if they exclude the managed component to forecast unmanaged (true) earnings. In contrast, they are said to be accurate if they include it to issue forecasts close to the reported earnings. Scant yet contradictory literature on the issue generalizes all analysts to be either accurate or informative. This study investigates analysts’ forecasts around Seasoned Equity Offerings (SEOs) when significant detrimental upwards earnings management is suspected. We posit that while some analysts strive to be accurate, others favour informativeness. Using individual forecasts around SEOs issued in Europe from 2000 to 2016, we find that while informativeness-seeking analysts decrease their post-SEO forecasts, accuracy-seeking ones leave them unchanged. We focus on the forecast downgrades and find that; the decrease is lesser for bigger firms that are less likely to manage earnings. This decrease is greater for firms more likely to manage earnings such as those with high discretionary accruals or those that issue a proportionally high value of equity. Our results contribute to the literature on analysts by segregating accurate and informative forecasts and identifying key characteristics impacting these forecasts. JEL Classification: G14; G17; G32; M41 |
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