Accuracy in Earnings Forecast and Organizational Life Cycle Stages: Evidences in the Brazilian Capital Market
DOI:
https://doi.org/10.17524/repec.v12i1.1530Keywords:
Analistas, Acurácia, Estágios do Ciclo de Vida OrganizacionalAbstract
Objective: This study aimed to investigate the effect of the organizational lifecycle on the accuracy of analysts’ forecasts in the Brazilian capital market, presupposing that the challenges for the financial analysts’ projections can vary in the course of the companies’ evolution. Method: The sample consisted of 713 companies per year in the period from 2008 till 2014. This information was used to measure the accuracy of the earnings forecasts, and Dickinson’s model (2011) was used to measure the companies’ life cycle stages. As for the analysis methods, linear and quantile regression and sensitivity test models were used. Results: The results revealed that the analysts’ earnings projections are affected more problematically for companies in the birth and decline stages, despite controlling for several common factors in the literature on analysts’ forecast errors. An additional control was included for financial difficulties, but the results remained qualitatively similar. As for the optimism and pessimism in the forecasts, the results appointed that, depending on the life cycle stage, the optimistic or pessimistic bias can particularly increase or decrease; the decline stage lead to projections with a lesser bias in comparison with the other non-mature stages, despite the previously mentioned controls. Contributions: The study can contribute to the literature by evidencing that environmental factors tend to play a determinant role in the accuracy of the earnings forecast.References
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