The effect of repeat restructuring charges on analysts' forecast revisions and accuracy

Beixin Lin, Rong Yang

Research output: Contribution to journalArticleResearchpeer-review

11 Citations (Scopus)

Abstract

The primary objective of this study is to examine the effect of prior restructuring charges on analyst forecast revisions and accuracy. We find evidence that analysts respond differently to first-time restructuring firms than to repeat restructuring firms. Analysts revise their forecasts of both one-year-ahead earnings and five-year long-term growth in earnings more negatively for first-time restructuring firms than for firms with prior charges. When we examine forecast errors in the year subsequent to the restructuring, we find that current charges complicate analysts' earnings forecast task. We further find that the decline in analyst forecast accuracy is mitigated by prior charges within past two years.

Original languageEnglish
Pages (from-to)267-283
Number of pages17
JournalReview of Quantitative Finance and Accounting
Volume27
Issue number3
DOIs
StatePublished - 1 Nov 2006

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Analysts' forecast revisions
Forecast accuracy
Restructuring charges
Charge
Analysts
Forecast error
Analysts' forecasts
Analysts' earnings forecasts
Long-term growth

Keywords

  • Analysts' forecast errors
  • Analysts' forecast revisions
  • Repeat restructuring charges

Cite this

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The effect of repeat restructuring charges on analysts' forecast revisions and accuracy. / Lin, Beixin; Yang, Rong.

In: Review of Quantitative Finance and Accounting, Vol. 27, No. 3, 01.11.2006, p. 267-283.

Research output: Contribution to journalArticleResearchpeer-review

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AB - The primary objective of this study is to examine the effect of prior restructuring charges on analyst forecast revisions and accuracy. We find evidence that analysts respond differently to first-time restructuring firms than to repeat restructuring firms. Analysts revise their forecasts of both one-year-ahead earnings and five-year long-term growth in earnings more negatively for first-time restructuring firms than for firms with prior charges. When we examine forecast errors in the year subsequent to the restructuring, we find that current charges complicate analysts' earnings forecast task. We further find that the decline in analyst forecast accuracy is mitigated by prior charges within past two years.

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