摘要：This paper evaluates whether analysts incorporate formal measures of earnings qualityinto their earnings forecasts. It examines whether the accrual ratio and abnormal accruals,measured with the Modified Jones (1991) Model of discretionary accruals, differentially informanalysts’ earnings forecasts. It uses the accuracy of analysts’ forecast as a context in which toevaluate how well analysts incorporate effects of the information contained in accrual ratio andabnormal accruals. The results indicate that the accrual ratio is negatively related to the absolutevalue of analysts’ forecast errors while the Modified Jones (1991) Model of discretionaryaccruals have virtually no economic effect on analysts’ forecast error. The insignificant effect ofdiscretionary accruals on analysts’ forecast may be attributed to analysts having alreadyincorporated the information therein in their earnings forecasts, effect of the accrual anomalyhaving been largely arbitraged away by market participants or both. This paper contributes to theresearch on analysts’ earnings forecast and earnings quality and helps bridge the gap betweenpractice and theory by demonstrating the differential impact of discretionary accruals (favored byacademics) and the accrual ratio (favored by analysts) on analysts’ forecast accuracy. This studyinforms researchers and policy makers interested in better understanding how analysts affects thefinancial markets including how they may have learned from previously documented marketanomalies such as the accrual anomaly. This is important as ultimately, efficient economy-widecapital allocation decisions are based partly on outputs of analysts’ forecasting processes.
