《The Quality of Analysts＇ Cash Flow Forecasts in China.》.pdf

228 C h irla A c c o u n t in g a n d F in a n c e R e v ie w Volume16，Number2一June2014 TheQualityofAnalysts’CashFlow Forecasts in China JunYapandChenxingM eng Abstract Thereisagrowingliteraturediscussingtheincentivesofanalyststo disseminatecash flow forecastsandthequality oftheseforecasts．Moststudiessupportthe d‘emand hypothesis’andsuggestthatcashflow forecastscontaininformationadditionaltothat providedinearningsforecasts。Incontrast，Givolyeta1．(2009)show thatcashflow forecastsareiustasimpleextrapolationofanalysts’earningsforecasts．Inresponsetothis challenge．Calleta1．(2013pointoutthattheregressiontestsinGivolyeta1．(2009)are non．diagnosticduetothemeasurementproblem containedintheUSdataset．Wesuggest thatGivolyeta1．(2009)methodcanbewellappliedinChinasinceChinesedatadonot havethesamemeasurementproblem asthatcontained inUSdata．Byreplicatingthe studiesofGivolyeta1．(2009)andCalIeta1．(2ol3)，wefindresultsconsistentwith Givolyela1．f2009)thatanalysts’cashflow forecastsappeartobenaiveextensionsof theirearningsforecastsinChina． Keywords：Analyst，Analysts’Forecast，CashFlow Forecast，Earn ingsForecast，China 1． 1ntroduction DeFondandHung(2003)documentanincreasingtrendinanalystsdisseminating cashflow forecasts．Toexplainthisfinding，theysuggestthe d‘emandhypothesis’，thatis， cashflow forecastsareprovidedinresponsetoademandbyinvestorsincaseswhere earningsmanagementislikelytobesevere．Mostofthefollow—uDstudiessupporttheir view andprovidefurtherevidencetoshow theincrementalvalueofcashflow forecasts relativetoearningsforecasts．Forexample，DeFondandHung(2007)showthatanalysts aremorelikelytodisseminatetheircashflow forecastsincountrieswithweakinvestor protection．MclnnisandCollins(201l1show amonitoringroleofcashflow forecasts， namelythatfirmsmanageearningslessaftertheyreceivecashflow forecasts．Ithasalso beenfoundthatearningsforecastsissuedtogetherwith cashflow forecastsaremore