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

Lawrence Brown
Georgia State University

Artur Hugon
Georgia State University

Abstract: We evaluate the earnings forecasting accuracy of teams of sell-side analysts relative to that of individual sell-side analysts. We find that teams of analysts forecast less accurately than do individual analysts, and teams of analysts forecast less accurately than do individuals comprising the teams. We hypothesize that the teams’ poor forecasting accuracy is associated with relatively less accountability for their forecast accuracy compared to that of individuals. Consistent with the accountability conjecture, we show that analysts are four times more likely to get terminated or demoted for their poor individual forecasting accuracy than for their poor team forecasting accuracy. Given teams’ poor forecasting accuracy and lack of accountability, we explore several potential explanations for their continuing existence.

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