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

Karin A. Petruska
Kent State University

Abstract: Prior literature suggests that analysts’ forecasts serve as a proxy for investor beliefs. This paper addresses the accounting regime relating to whether cash flow per share forecasts add to the information content or disclosure of financial information during the Regulation FD environment. It supports prior research which indicates Regulation FD is associated with analysts’ earnings per share forecast errors. The empirical evidence also suggests that analysts’ cash flow per share forecast errors provide incremental value in explaining earnings per share forecast errors during this period. Regulation FD is positively associated with analysts' cash flow per share forecast errors after controlling for several determinants of earnings forecast, including earnings per share forecast error. To determine if an endogeneity issue exists, a set of simultaneous equations are used which lends support that both analysts’ cash flow and earnings per share forecast errors may be jointly determined.

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