Analysts’ Cash Flow Forecast Accuracy and Recommendation Profitability

Abstract

We examine whether analysts who supplement their earnings forecasts with more accurate cash flow forecasts generate more profitable recommendations. Previous research using consensus cash flow forecasts, or the issuance of cash flow forecasts fails to document a significant relation between analysts' cash flow forecasts and their stock recommendation performance. We argue that analysts' cash flow forecasts differ in quality and hypothesize that the relative accuracy of an individual analyst's cash flow forecasts is positively associated with the profitability of that analyst's stock recommendations. We find that when analysts issue both earnings and cash flow forecasts for a firm, cash flow forecast accuracy predicts stock recommendation profitability even after controlling for earnings forecast accuracy. Our findings are robust to the use of instrumental variables and the use of recommendation change in the analysis. Whether analysts also issue sales forecasts and/or long-term growth forecasts does not affect the results.

Relación de los índices financieros con la actitud tributaria de las microempresas

“…• Esta obra está bajo una licencia de Creative Commons Atribución-CompartirIgual 4.0 Internacional (CC BY-SA 4.0) https://creativecommons.org/licenses/by-sa/4.0/deed.es https://www.produccioncientificaluz.org/index.php/rvg Twitter: @rvgluz ________Revista Venezolana de Gerencia, Año 27 Especial 8, 2022 Los analistas emiten pronósticos de ganancias y flujo de efectivo para una empresa, la precisión del pronóstico de flujo de efectivo predice la rentabilidad de las recomendaciones de acciones, incluso después de controlar la precisión del pronóstico de ganancias (Pan, 2019). La mayoría de las empresas cumplen con algunas regulaciones, pero no con otras.…”