We examine the informativeness of analyst forecast revisions that are directionally inconsistent with prior stock price movements (sign-inconsistent revisions). Sign-inconsistent revisions represent approximately one-half of the forecast revisions from 1995 through 2010. Our tests indicate that signinconsistent revisions are less informative than are sign-consistent revisions. Sign-inconsistent revisions are less likely to be closer to actual earnings realizations and they generate smaller stock price reactions. We also find evidence that sign-inconsistent revisions are associated with analysts' economic incentives to generate trading volume and their behavioural limitations related to information uncertainty. These results suggest that sign-inconsistent revisions do not necessarily benefit investors.

Other comprehensive income items (OCI) increase and decrease book value and therefore indicate more or less firm value. It follows that OCI items, albeit transitory, may contribute to a wealth effect that influences expenditure decisions. In support, our regression results indicate an association between current year OCI and future discretionary financing, investing, and operating expenditures. However, we also find that OCI-influenced expenditures are not associated with future profitability, suggesting such expenditures are not value creating. In further tests, we find that future discretionary expenditures are associated with both positive OCI and negative OCI for higher leveraged firms but only associated with positive OCI for lower leveraged firms. These results suggest that, for highly leveraged firms, positive OCI loosens debt constraints on future expenditures while negative OCI tightens debt constraints on future expenditures. For firms without debt constraints the results are suggestive of possible wealth transfers from debtholders to shareholders. K E Y W O R D S debt constraints, discretionary investing, financing and operating expenditures, other comprehensive income, wealth effect, wealth transfers INTRODUCTIONThe information value of other comprehensive income relative to earnings is not well understood. Other comprehensive income (OCI) and earnings appear to have similar components. OCI and earnings both contain gains that increase owners' equity and indicate more firm value. Similarly, OCI and earnings both contain losses that decrease owners' equity and indicate less firm value. The wealth effect of gains and losses on firm value suggests, all things being equal, that managers with firm value increases will tend to spend more and managers with firm value decreases will tend to spend less. However, OCI items and earnings items differ fundamentally. Unrealized gains and losses are likely to be presented, at least temporarily, in owners' equity as OCI items while realized gains and losses appear on the income statement as components of earnings. In part because OCI gains and losses are unrealized, they are largely considered transitory thereby potentially limiting their usefulness for predicting future cash flows (Jones & Smith, 2011), income 72

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