An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Andrew A. Anabila
Pace University

Abstract: I examine the utility of positive asset revaluations for analysts’ forecasts of UK firms, in the context of managerial incentives for discretionary disclosure. I show that asset revaluations are positively related to analysts’ five-year earnings growth forecasts. However, I find that revaluations are negatively related to the contemporaneous return on equity, implying that the predicted growth is an expected future improvement on relatively poor performance. I also find that revaluations are positively related to analysts’ earnings forecast dispersion, absolute error, and pessimism bias. Further, a minimum of 46 (40) percent of firms that report a net revaluation increment in a given year do report a decrement in each of the two years (the third year) thereafter. These results suggest that asset revaluations are imprecise signals that are positively related to both earnings prediction errors and differences in analysts’ opinion.

Back to Session Listing

AAA Home Page