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Corporate investment decisions are among the most important decisions of a firm. Internal capital markets play a key role in facilitating the allocation of capital resources in order to finance investment projects within diversified firms. This thesis investigates internal capital markets and its relationship with analysts earnings forecast errors in three countries with two distinct financial systems, namely, the market-based and bank-based financial system. Using segment level data for public listed companies in the UK, France and Germany between 2005 and 2010, we examine the operation and efficiency of internal capital markets in market- and bank-based systems. We also examine the impact of the financial crisis of 2008 on internal capital markets and analysts earnings forecasts errors, namely, the accuracy, bias and dispersion. The findings indicate internal capital markets actively facilitate the allocation of resources within diversified firms and, in general, operate inefficiently. Furthermore, internal capital markets appear to be more active in France compared with the UK. On the other hand, their role appears to be limited in Germany, as segments appear to rely more on their own resources and less on internal capital markets for investments. In addition, we find that internal capital market activity declines and efficiency improves during the financial crisis in UK. In contrast, there is no significant evidence to suggest that efficiency improves during the crisis in France or Germany. This research also finds some evidence to suggest internal capital markets operations aggravate firm complexity and, in turn, negatively affect short-term forecast accuracy in the UK. In addition to this, our analysis shows there is a positive relationship between the size of internal capital markets and dispersion in analysts earnings forecasts. In general, our study shows analysts are optimistic about firms future performance; however, the level of optimism significantly declines during the financial crisis. Lastly, we report a positive relationship between efficiency of internal capital markets and optimism in earnings forecasts.

<p>Background: An evaluation of analysts´ forecasting ability is interesting since their estimates constitute an important part in stock valuation and investment decisions. The recent years´ development in the stock market has lead to criticism of analysts’ deficient forecasts. </p><p>Purpose: The purpose of this thesis is to evaluate analysts´ forecasting ability concerning companies quoted at Stockholmsbörsen between 1987 and 2002. We also intend to discuss possible explanations for analysts’ behavior in case of deficient accuracy. </p><p>Method: Regression analysis is used to compare consensus estimates of earnings per share to actual earnings per share. We attempt to investigate the existence of a relation between forecasting ability and forecast horizon, the volatility at Stockholmsbörsen and the industry in which the firm operates. Behavioral finance and economic incentives is used to discuss the most convincing explanations to analysts´ behavior in cases of deficient accuracy. </p><p>Result: The study indicates over optimistic forecasts and overreaction to earnings information. Analysts tend to give more accurate forecasts closer to earnings announcement. We believe that herding, economic incentives and the fact that analysts get information from the company explains a significant part of analysts’ behavior. In addition, the study shows a possible relation between more accurate forecasts and lower volatility. Concerning industries we find stronger overreaction in healthcare and heavy industry. The study shows the most exceptional optimism in consumer goods/services and IT/telecom.</p>

Background: An evaluation of analysts´ forecasting ability is interesting since their estimates constitute an important part in stock valuation and investment decisions. The recent years´ development in the stock market has lead to criticism of analysts’ deficient forecasts. Purpose: The purpose of this thesis is to evaluate analysts´ forecasting ability concerning companies quoted at Stockholmsbörsen between 1987 and 2002. We also intend to discuss possible explanations for analysts’ behavior in case of deficient accuracy. Method: Regression analysis is used to compare consensus estimates of earnings per share to actual earnings per share. We attempt to investigate the existence of a relation between forecasting ability and forecast horizon, the volatility at Stockholmsbörsen and the industry in which the firm operates. Behavioral finance and economic incentives is used to discuss the most convincing explanations to analysts´ behavior in cases of deficient accuracy. Result: The study indicates over optimistic forecasts and overreaction to earnings information. Analysts tend to give more accurate forecasts closer to earnings announcement. We believe that herding, economic incentives and the fact that analysts get information from the company explains a significant part of analysts’ behavior. In addition, the study shows a possible relation between more accurate forecasts and lower volatility. Concerning industries we find stronger overreaction in healthcare and heavy industry. The study shows the most exceptional optimism in consumer goods/services and IT/telecom.

Starting from 2005 the disclosure of financial forecast for Taiwanese public companies has not been mandatory, firms can decide whether they want to disclose, and if so, how and when to disclose. How does the investor's reaction affect this decision? Furthermore, what is the trade-off between transparency and precision? This study develops a theoretical model in which the voluntary disclosure of earnings forecast is a double-edged sword. Such disclosure may reduce information asymmetry, but simultaneously allows entrepreneurs to hype the stock. The proposed model assumes that insiders might manipulate information and investors can learn with bounded rationality. The analytical results demonstrate that entrepreneurs may forgo earnings forecast disclosure if they can achieve greater profit under non-disclosure. In the multiperiod case, this study shows that insiders would reduce their forecast manipulation behavior due to the cost of forecast error and diminishing marginal expected profit. This study accommodates an explanation of the decrease in voluntary disclosure and the popularity of investor conferences in Taiwan. The inferences of the proposed model are examined based on forecasts issued by Taiwanese listed firms. The empirical results evidence a positive relationship between insiders¡¦ trading profit and manipulation of earnings forecast. Additionally, insiders¡¦ trading profit regarding forecast revisions is greater under voluntary disclosure than mandatory disclosure. This study offers important insights into earnings forecast policy in emerging markets.

This study examines whether earnings guidance contributes to investor short-termism -- excessive focus on a firm's short term performance and insufficient consideration of its long-term value creation potential. Using an adaptation of Ohlson's (1995) valuation model, I find that investors place significantly higher (lower) weight on short-term (long-term) earnings of quarterly guidance firms than on the corresponding earnings of non-guidance firms. Further tests indicate that the differential weighting cannot be fully explained by measurement errors, earnings properties, risk, or accuracy of analysts' forecasts. For a sample of guidance initiating firms, I find no differential valuations of firm value components before the initiation of guidance, but large differential valuations after guidance initiation. In contrast, for guidance discontinuation firms, I find that investors shift their focus from short-term to long-term earnings after the discontinuation of guidance. Together, the results support critics' claim that quarterly guidance contributes to short-term fixation in the market. / text

The beginning of the 21st century was plagued with unprecedented instances of corporate fraud. In an attempt to address apparent non-existent or “broken” corporate governance policies, sweeping measures of financial reporting reform ensued, having specific requirements relating to the composition of audit committees, the interaction between audit committees and external auditors, and procedures concerning auditors’ assessment of client risk. The purpose of my dissertation is to advance knowledge about “good” corporate governance by examining the association between meeting-or-beating analyst forecasts and audit fees, audit committee compensation, and audit committee tenure and “busyness”. Using regression analysis, I found the following: 1) the frequency of meeting-or-just beating (just missing) analyst forecasts is negatively (positively) associated with audit fees, 2) the extent by which a firm exceeds analysts’ forecasts is positively (negatively) associated with audit committee compensation that is predominately equity-based (cash-based), and 3) the likelihood of repeatedly meeting-or-just beating analyst forecasts is positively associated with audit committee tenure and “busyness”. These results suggest that auditors consider clients who frequently meet-or-just beat forecasts as being less “risky”, and clients that frequently just miss as being more “risky”. The results also imply that cash-based director compensation is more successful in preserving the effectiveness of the audit committee’s financial reporting oversight role, that equity-based compensation motivates independent audit committee directors to focus on short-term performance thereby aligning their interests with management, and that audit committee director tenure and the degree of director “busyness” can affect an audit committee member’s effectiveness in providing financial reporting oversight. Collectively, my dissertation provides additional insights regarding corporate governance practices and informs policy-makers for future relevant decisions.

當企業的經營面臨不確定的情況時，使用穩健原則固然是可靠的，但是公司如果過度的使用穩健原則來操縱財務報表，將使資產和盈餘嚴重低估和扭曲，因此反而會降低財務報表的可靠性以及攸關性。公司的財務報表是財務分析師預測的來源之一，故當公司的盈餘由於受到管理當局對會計保守程度之操縱而有較大波動幅度時，若分析師相信公司當期盈餘是對未來盈餘的無偏誤預測指標，則財務分析師將會被誤導。因此，公司的會計保守程度對分析師盈餘預測的誤差和不同分析師間對盈餘預測意見不一致之程度應該有重大的影響。 　　本文以民國90年至94年之上市公司為研究對象，經由迴歸模型來分析公司會計保守性與分析師盈餘預測誤差與盈餘預測分歧程度間之關係，以檢視財務分析師是否能察覺保守性會計對公司盈餘的影響而反映於其盈餘預測中。結果發現會計保守性對分析師盈餘預測屬性均有正向影響，表示財務分析師在預測公司未來盈餘時會對管理當局所選擇的會計保守程度加以評估，並考量管理當局利用會計保守性進行盈餘管理的情形，進而影響其對公司未來盈餘的預測。 / Management may overuse accounting conservatism to manage the financial statements and undervalue assets and earnings and reduce the reliability and relevance of financial statements though conservatism is an increasing trend in accounting practice. The conservative information may lead analysts to biased forecast when a company’s earning has high volatility. Consequently, the extent of accounting conservatism should have significant effect on the analysts’ earnings forecast errors and forecast dispersion. This study examines the relationship of accounting conservatism and analysts’ annual earnings forecast errors and forecast dispersion by using a sample of listed firms in Taiwan. The results show that accounting conservatism has a positive relationship with the analyst earnings forecast errors and forecast dispersion. It implies that financial analysts may evaluate the extent of accounting conservatism and make adjustment in earnings forecast.

本研究旨在探討管理當局發佈自願性盈餘預測意願、預測精確度、預測型態與管理當局能力之關聯性，並進一步檢測能力較佳之管理當局所發佈之盈餘預測對投資人是否具增額資訊內涵。 實證分析結果顯示管理當局能力與管理當局發佈盈餘預測之機率呈顯著正相關，亦即管理當局能力愈好，發佈盈餘預測之機率愈高；再者，本研究發現能力愈佳之管理當局，其盈餘預測之精確度亦會較高；而實證結果亦顯示當管理當局能力較好時，較願意以資訊量較多之完整式財務預測型態發佈財務預測。增額測試結果則顯示市場對於能力較佳之管理當局發佈之自願性盈餘預測反應程度較高。 / The primary objective of this thesis is to explore whether the managerial ability is related to management earnings forecast, earnings forecast accuracy , and disclosure format. Additionally, this thesis investigates whether managerial ability increases the informativeness of management earnings forecast for (potential) investors. Empirical results show that managers with superior ability tend to announce management earnings forecast and when managers have better ability, they shall announce more precise management earnings forecast. About disclosure format, this thesis finds that managers with superior ability prefer to announce complete earnings forecasts than simple ones. Additionally, market reaction will be more to the informativeness of management earnings forecast which made by managers with better ability.

本研究之目的在探討，上期對本期所做之盈餘預測與本期實際盈餘間誤差所產生之未預期盈餘，對於管理階層在本期預測下期盈餘以及財務分析師針對該預測所作之預測修正，即對於該兩者的攸關性是否會隨著34號公報之實施而提高，也就是說，在34號公報實施之後，未預期盈餘對於管理當局盈餘預測以及分析師預測修正之影響，是否會更加顯著相關。 實證結果顯示，不論34號公報適用前後，管理當局盈餘預測與未預期盈餘之間皆具有攸關性，但在34號公報適用之後，兩者之間的顯著性並未增強；而另一方面，在34號公報適用前後，財務分析師盈餘預測修正與未預期盈餘之間皆具有攸關性，且在34號公報適用之後，兩者之間的顯著性有增強。 / This thesis examines whether the issuance of SFAS No.34 can heighten the association between the unexpected earnings for current period and the management earnings forecast for the next period. This research also examines if the issuance of SFAS No.34 will heighten the relationship between the unexpected earnings for current period and the analysts’ revision of the management earnings forecast for the next period. The unexpected earnings mean the difference between the earnings forecast for current period and the actual earnings in current period This thesis finds that there is a negative association between management earnings forecast and the error of the expected earnings whether SFAS No.34 has been issued or not, but the issuance of SFAS No.34 doesn’t heighten the association between the management earnings forecast and the error of the expected earnings. Besides, the result of the research shows that there is a positive relationship between the analyst’s revision of the management earnings forecast and the error of the expected earnings. Furthermore, the relationship is heightened by the issuance of SFAS No.34.