Analyst revenue forecast reporting and the quality of revenues and expenses

Bilinski, Pawel; Eames, Michael

doi:10.1111/jbfa.12355

Cited by 16 publications

(7 citation statements)

References 91 publications

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“…Firms manage earnings in the pre-IPO period in such a way that does not affect their future performance (Marquardt and Wiedman, 2004). Analysts are more likely to produce revenue forecasts for younger firms (Bilinski and Eames, 2019). Young firms have a greater magnitude of one-time expenses.…”

Section: Firm Age and Earnings Managementmentioning

confidence: 99%

Influence of firm size and firm age on classification shifting: an empirical study on listed firms in India

Bansal

2021

JFRA

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Purpose Prior studies document that managers engaged in shifting of non-operating revenue to operating revenue (revenue shifting) and shifting of operating expenses to non-operating expenses (expense shifting (ES)) within income statement to report inflated operating profits of firms. This study aims to identify the factors affecting revenue shifting and ES. Design/methodology/approach The operating revenue model (Malikov et al., 2018) and the core earnings expectation model (McVay, 2006) are used for measuring revenue shifting and ES, respectively. The panel data regression models are used to analyze the data for this study. Findings The study results show that large and old firms are engaged in revenue shifting, whereas small and young firms prefer ES over revenue shifting for reporting inflated operating profits. These results imply that firms choose the shifting strategy based on relative advantage and ease in execution. The results are robust after controlling for accruals earnings management, real earnings management and endogeneity bias. Practical implications It suggests investors minutely investigate the operating performance metrics of initial public offering firms that are relatively small and young while buying their shares. Besides, findings suggest accounting standard setters make more mandatory disclosure requirements for recording expense and revenue items in the income statement to curb this corporate misfeasance of classification shifting. Originality/value This is among the earlier attempts to identify firm-specific factors that incentivize firms to prefer one form of shifting over another. Second, the study jointly examines both forms of shifting by taking a uniform sample of firms over the same period. Most of the prior studies have examined one form at a time.

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Section: Firm Age and Earnings Managementmentioning

confidence: 99%

Influence of firm size and firm age on classification shifting: an empirical study on listed firms in India

Bansal

2021

JFRA

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“…3 By correlating variability in dividend payments to analysts' supply of dividend forecasts, we can infer how dividend uncertainty is associated with investor demand for dividend information. See DeFond and Hung (2003), Givoly et al (2009), Call et al (2013), Bilinski (2014) and Bilinski and Eames (2019) for similar analysis for cash flow and revenue forecasts.…”

Section: Introductionmentioning

confidence: 99%

Analyst Dividend Forecasts and Their Usefulness to Investors

Bilinski¹,

Bradshaw²

2021

The Accounting Review

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In contrast to the disappearing dividends view prevalent in the literature, we document extensive dividend payments by firms and significant variability within firms and across 16 countries during 2000-2013. We predict that within-firm variability in dividends increases investor demand for forward-looking dividend information, and analysts respond by producing informative dividend forecasts. We find that analyst dividend forecasts are available for most dividend-paying firms and are more prevalent for firms with higher variability of dividends. Analyst dividend forecasts are more accurate than alternative proxies based on extrapolations of past dividends. Finally, dividend forecasts (i) are incrementally useful to investors beyond information in other fundamentals such as earnings and cash flow forecasts, (ii) help investors interpret earnings quality, and (iii) are associated with investors' portfolio allocation decisions.

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“…The dearth of historical data pertaining to stock performance, firm' operations and financials and complex business models enhance the information asymmetry and ambiguity in valuing the firms (Barg et al, 2021;Gerard Sanders and Boivie, 2004;Menon and James, 2022). Studies found the traditional valuation approaches, namely, the comparable firm approach and the discounted cash flow method, inefficacious in capturing the precise estimates of new firms (Berkman et al, 2000;Bilinski and Eames, 2019;Schosser and Str€ obele, 2019;Schreder and Bilinski, 2021). Kim and Ritter (1999) observed the price-earnings, marketto-book and price-to-sales multiples without adjustment to be modestly effective in valuing young ventures (Kim and Ritter, 1999).…”

Section: Ipo Performance and Valuation Anomaliesmentioning

confidence: 99%

IPO performance anomaly: evidence from new aged ventures and loss-making listings in India

Agrawal

2024

JAMR

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PurposeThe study examines the IPO resilience grounded on the firm’s intrinsic factors.Design/methodology/approachWe examine the association of IPO performance and post-listing firm’s performance with issuers' pre-listing financial and qualitative traits using panel data regression.FindingsIPOs floated in the Indian market from July 2009 to March 31, 2022, evince the notable influence of issuers' pre-IPO fundamentals and legitimacy traits on IPO returns and post-listing earning power. Where the pandemic’s favorable impact is discerned on the post-listing year earning power of the issuer firms, the loss-making issuers appear to be adversely affected by the Covid disruption. Perhaps, the successful listing equipped the issuers with the financial flexibility to combat market challenges vis-à-vis failed issuers deprived of desired IPO proceeds.Research limitations/implicationsHigh initial returns followed by a declining pattern substantiate the retail investors to be less informed vis-à-vis initial investors, valuers and underwriters, who exit post-listing after profit booking. Investing in the shares of the newly listed ventures post-listing in the secondary market can shield retail investors from the uncertainty losses of being uninformed. The IPO market needs stringent regulations ensuring the verification of the listing valuation, the firm’s credentials and the intent of utilizing IPO proceeds. Healthy development of the IPO market merits reconsidering the listing of ventures with weak fundamentals suspected to withstand the market challenges.Originality/valueGiven the tremendous rise in the new firm venturing into the primary market and the spike in IPOs countering the losses immediately post-opening, the study examines the loss-making and young firms IPOs separately, adding novelty to the study.

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Analyst revenue forecast reporting and the quality of revenues and expenses

Cited by 16 publications

References 91 publications

Influence of firm size and firm age on classification shifting: an empirical study on listed firms in India

Influence of firm size and firm age on classification shifting: an empirical study on listed firms in India

Analyst Dividend Forecasts and Their Usefulness to Investors

IPO performance anomaly: evidence from new aged ventures and loss-making listings in India

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