Journal article
The effect of cash flow forecasts on accrual quality and benchmark beating
Journal of accounting & economics, Vol.51(3), pp.219-239
04/01/2011
DOI: 10.1016/j.jacceco.2010.10.005
Abstract
When analysts provide forecasts of both earnings and operating cash flow, they also implicitly provide a forecast of total operating accruals. We posit that this increases the transparency and the expected costs of accrual manipulations used to manage earnings. As a consequence, we predict and find that accrual quality improves and firms’ propensity to meet or beat earnings benchmarks declines following the provision of cash flow forecasts. We also predict and find that firms turn to other benchmark-beating mechanisms, such as real activities manipulation and earnings guidance in response to the provision of cash flow forecasts.
Details
- Title: Subtitle
- The effect of cash flow forecasts on accrual quality and benchmark beating
- Creators
- John McInnis - The University of Texas at AustinDaniel W. Collins - University of Iowa
- Resource Type
- Journal article
- Publication Details
- Journal of accounting & economics, Vol.51(3), pp.219-239
- DOI
- 10.1016/j.jacceco.2010.10.005
- ISSN
- 0165-4101
- eISSN
- 1879-1980
- Publisher
- Elsevier B.V
- Number of pages
- 21
- Language
- English
- Date published
- 04/01/2011
- Academic Unit
- Accounting
- Record Identifier
- 9984962892302771
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