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Why Do Managers Voluntarily Issue Cash Flow Forecasts
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Book Synopsis Why Do Managers Voluntarily Issue Cash Flow Forecasts? by : Charles E. Wasley
Download or read book Why Do Managers Voluntarily Issue Cash Flow Forecasts? written by Charles E. Wasley and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We study a relatively recent change in voluntary disclosure practices by management, namely the issuance of cash flow forecasts. We predict and find that management issues cash flow forecasts to signal good news in cash flow, to meet investor demand for cash flow information, and to pre-commit to a certain composition of earnings in terms of cash flow versus accruals, thus reducing the degree of freedom in earnings management. Our results also suggest that management discloses good news in cash flow to mitigate the negative impact of bad news in earnings, to lend credibility to good news in earnings and to signal economic viability for young firms. Our finding that management cash flow forecasts primarily convey good news is in contrast to the generally negative nature of management earnings guidance and suggests that different incentives drive firm disclosure of different financial information.
Book Synopsis Analysts' Selective Provisions of Cash Flow Forecasts Between Good and Bad News Earnings Forecasts by : Choong-Yuel Yoo
Download or read book Analysts' Selective Provisions of Cash Flow Forecasts Between Good and Bad News Earnings Forecasts written by Choong-Yuel Yoo and published by . This book was released on 2009 with total page 204 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this thesis, I examine the factors associated with analysts' voluntary practice of issuing cash flow forecasts and earnings forecasts on the same day. I draw on Hughes and Pae's (2004) management partial disclosure equilibrium and predict how an analyst decides to issue a cash flow forecast revision along with and according to her bad news and good news earnings forecast revision. In particular, I predict that analysts strategically choose to supplement earnings forecasts with positive cash flow news when they deliver bad news earnings forecasts. Consistent with my prediction, I find that analysts are more likely to issue cash flow forecast revisions in the opposite direction to their earnings forecast revisions when they issue downward earnings forecast revisions than when they issue upward earnings forecast revisions. The results suggest that analysts may not make their decisions to issue cash flow forecasts as objectively as they ought to do in their role as independent information intermediaries. Rather, analyst decisions to issue cash flow forecasts are akin to managers' strategic decisions to voluntarily disclose supplemental information to affect investors' confidence in their primary news (earnings forecasts).
Book Synopsis Soft-Talk Management Cash Flow Forecasts by : Yan Cao
Download or read book Soft-Talk Management Cash Flow Forecasts written by Yan Cao and published by . This book was released on 2007 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: We exploit a novel feature of management cash flow forecasts to investigate how managers' discretion over forecast verifiability affects the credibility and stock price effects of such forecasts. Many management cash flow forecasts are issued with an equivocal definition of the cash flow number being forecasted. We refer to such forecasts as quot;soft-talkquot; cash flow forecasts, and expect that due to their lower ex-post verifiability, they will have lower credibility and hence a smaller effect on stock prices when compared to unequivocal management cash flow forecasts. Our findings suggest that quot;soft-talkquot; is associated with an optimistic bias in management cash flow forecasts. Furthermore, managers' decision to issue quot;soft-talkquot; cash flow forecasts is related to economic factors including litigation risk, financial distress, actual cash flow performance, analyst following and the issuance of prior cash flow forecasts. While we find that management cash flow forecasts in general affect stock prices, consistent with the low verifiability of and optimistic bias in quot;soft-talkquot; cash flow forecasts, investors do not find good news quot;soft-talkquot; management cash flow forecasts credible. Finally, we examine the interaction between management earnings and cash flow forecasts and document that they serve to enhance the credibility in each other by reducing optimistic forecast bias. We also find that the bias in both types of forecasts is related and that the relation is a function of forecast difficulty.
Book Synopsis Analysts' Cash Flow Forecasts and the Predictive Ability and Pricing of Operating Cash Flows by : Andrew C. Call
Download or read book Analysts' Cash Flow Forecasts and the Predictive Ability and Pricing of Operating Cash Flows written by Andrew C. Call and published by . This book was released on 2009 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: I examine the association between analysts' cash flow forecasts and the predictive ability and pricing of operating cash flows. I argue that when analysts issue cash flow forecasts, they serve a monitoring role over the firm's reported cash flow information. Consistent with this idea, I find the ability of current cash flows to predict future cash flows is greater for firms whose analysts issue cash flow forecasts, and improves when analysts begin forecasting cash flows, suggesting analysts' cash flow forecasts discipline managers to report cash flow information that is more informative about future firm prospects. Furthermore, I find the incremental weight investors assign to operating cash flows is greater for firms with a cash flow forecast than for firms without a cash flow forecast, and increases in the years immediately after analysts begin issuing cash flow forecasts. As a result, the anomalous underpricing of operating cash flows is eliminated for firms whose analysts issue cash flow forecasts. These results suggest analysts' cash flow forecasts have implications for both the reporting and pricing of cash flow information.
Book Synopsis Cash-Flow Forecasting by : William A. Loscalzo
Download or read book Cash-Flow Forecasting written by William A. Loscalzo and published by Prentice Hall. This book was released on 1982 with total page 200 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Do Analysts' Cash Flow Forecasts Encourage Managers to Enhance Real Cash Flows? Evidence from Tax Planning by : Benjamin C. Ayers
Download or read book Do Analysts' Cash Flow Forecasts Encourage Managers to Enhance Real Cash Flows? Evidence from Tax Planning written by Benjamin C. Ayers and published by . This book was released on 2013 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent research finds that analysts' cash flow forecasts have meaningful financial reporting ramifications, but to date, the identified effects are unlikely to yield meaningful cash flow benefits. This study examines whether analysts' cash flow forecasts encourage managers to enhance the firm's cash flow position through tax avoidance activities. We evaluate the change in cash tax avoidance after analysts begin issuing cash flow forecasts relative to a propensity-score matched control sample without cash flow forecasts. Consistent with analysts' cash flow forecasts encouraging tax avoidance that enhances real cash flows, we find a negative association between cash effective tax rates and analysts' cash flow coverage. Additional analysis suggests this association is driven both by strategies to permanently avoid and to defer tax payments, and that increased cash tax avoidance activity represents a significant component of the overall increase in reported operating cash flows after the initiation of analysts' cash flow coverage.
Book Synopsis The Implications of Cash Flow Forecasts for Investors' Pricing and Managers' Reporting of Earnings by : Andrew Crafton Call
Download or read book The Implications of Cash Flow Forecasts for Investors' Pricing and Managers' Reporting of Earnings written by Andrew Crafton Call and published by . This book was released on 2007 with total page 75 pages. Available in PDF, EPUB and Kindle. Book excerpt: I examine the role of analysts' cash flow forecasts on both investors' pricing and managers' reporting of earnings. I find that when setting stock prices, investors place more (less) weight on the cash (accrual) component of earnings for firms with a cash flow forecast, and that investors shift this weighting in the years immediately following analysts' initiation of cash flow coverage. Furthermore, the weight investors assign to these earnings components is a function of firm-specific factors predicted to affect the usefulness of the underlying cash flow information. I also find that for firms with a cash flow forecast, the cash (accrual) component of earnings is more (less) predictive of future firm prospects, consistent with analysts successfully choosing firms for which to issue a cash flow forecast. Lastly, I document that managers are more likely to boost operating cash flows if the firm has a cash flow forecast, suggesting that the nature of the capital market pressure affects the mechanism through which earnings are managed.
Book Synopsis Cash Flow Forecasting by : Andrew Fight
Download or read book Cash Flow Forecasting written by Andrew Fight and published by Elsevier. This book was released on 2005-10-12 with total page 263 pages. Available in PDF, EPUB and Kindle. Book excerpt: Budgets are like road maps -- they provide a direction for a corporates financial management. Balance sheets and statements of revenues also provide insights into how well a company is following that direction. But cash flow and cash flow forecasts are what guide the day-to-day itinerary for an organization. Budgets and cash flow are dynamic -- adjustments and changes can and should occur. If you understand what you are looking at, you can use cash flow to create better budgets and thus more accurate cash flow forecasting. Cash Flow Forecasting outlines the techniques required to undertake a detailed analysis of the cash flow dynamics of the business from both a historical and forward looking perspective. Cash Flow Forecasting explains how to: * Determine appropriate cash flow figures from pro forma financial statements * Interpret detailed cash flow forecasts and understand the difference between profit and cash flow * Conserve or generate cash in the short term * Evaluate different methods of project evaluation * Recognize the limitations of accounting information in valuing companies *Inspired by basic entry level training courses that have been developed by major international banks worldwide * Will enable students and those already in the finance profession to gain an understanding of the basic information and principles of cash flow forecasting * Includes questions with answers, study topics, practical "real world" examples and extensive bibliography
Book Synopsis What Determines Management Cash Flow Forecasts in the Oil and Gas Industry? by : Yun Fan
Download or read book What Determines Management Cash Flow Forecasts in the Oil and Gas Industry? written by Yun Fan and published by . This book was released on 2015 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines the determinants of management cash flow forecasts in the oil and gas industry. The oil and gas industry is one of the most important industries worldwide. Oil is considered the number one commodity, which accounts for roughly ten percent of world trade (Wright and Gallun 2008). The industry is characterized by unstable prices, diminishing supplies, and increasing demand. As suggested by prior research and current accounting standards, cash flow information is especially relevant for understanding the operations of oil and gas firms. We identify firm characteristics that affect oil and gas firm managers' decision to forecast cash flows. We find that managers of the firms 1) in financial distress, 2) with higher leverage, 3) obtaining more debt in the following year, 4) with more intensive capital investment, and 5) with higher earnings volatility are more likely to issue cash flow forecasts. The decision to provide such forecasts is negatively related to growth opportunities and cash flow volatility. Our study contributes to the understanding of why some oil and gas firms provide specific guidance of cash flows beyond the required disclosure, while others do not.
Book Synopsis Cash Flow Forecasting and Liquidity by : Brian Coyle
Download or read book Cash Flow Forecasting and Liquidity written by Brian Coyle and published by Global Professional Publishi. This book was released on 2000 with total page 146 pages. Available in PDF, EPUB and Kindle. Book excerpt: Topics include: � Planning and preparation for forecasting cash flow � The importance of liquidity in financial management � Establishing baseline forecasting models � Sample exercises
Book Synopsis Cash Flow Analysis and Forecasting by : Timothy Jury
Download or read book Cash Flow Analysis and Forecasting written by Timothy Jury and published by John Wiley & Sons. This book was released on 2012-05-03 with total page 341 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book is the definitive guide to cash flow statement analysis and forecasting. It takes the reader from an introduction about how cash flows move within a business, through to a detailed review of the contents of a cash flow statement. This is followed by detailed guidance on how to restate cash flows into a template format. The book shows how to use the template to analyse the data from start up, growth, mature and declining companies, and those using US GAAP and IAS reporting. The book includes real world examples from such companies as Black and Decker (US), Fiat (Italy) and Tesco (UK). A section on cash flow forecasting includes full coverage of spreadsheet risk and good practice. Complete with chapters of particular interest to those involved in credit markets as lenders or counter-parties, those running businesses and those in equity investing, this book is the definitive guide to understanding and interpreting cash flow data.
Book Synopsis Earnings Management by : Joshua Ronen
Download or read book Earnings Management written by Joshua Ronen and published by Springer Science & Business Media. This book was released on 2008-08-06 with total page 587 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book is a study of earnings management, aimed at scholars and professionals in accounting, finance, economics, and law. The authors address research questions including: Why are earnings so important that firms feel compelled to manipulate them? What set of circumstances will induce earnings management? How will the interaction among management, boards of directors, investors, employees, suppliers, customers and regulators affect earnings management? How to design empirical research addressing earnings management? What are the limitations and strengths of current empirical models?
Book Synopsis On the Association Between Corporate Voluntary Disclosure and Earnings Management by : Ron Kasznik
Download or read book On the Association Between Corporate Voluntary Disclosure and Earnings Management written by Ron Kasznik and published by . This book was released on 1995 with total page 262 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Cross-sectional Determinants of the Impact of Management Cash Flow Forecasts by : Yun Fan
Download or read book Cross-sectional Determinants of the Impact of Management Cash Flow Forecasts written by Yun Fan and published by . This book was released on 2011 with total page 140 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Intellectual Property Rights and the Financing of Technological Innovation by : Carl Benedikt Frey
Download or read book Intellectual Property Rights and the Financing of Technological Innovation written by Carl Benedikt Frey and published by Edward Elgar Publishing. This book was released on 2013-01-01 with total page 302 pages. Available in PDF, EPUB and Kindle. Book excerpt: 'A major contribution to the literature on the role of intellectual property rights (IPR) for the financing of innovation. The book is extensively researched and provides compelling insights for IPR managers, technology investors and policymakers trying to promote the efficiency of capital markets and national systems of innovation.' Knut Blind, Berlin University of Technology, Germany Following the transition of industrial nations to knowledge economies, the financing of technological innovation has become a central issue in public policy, corporate finance and business management. This detailed book examines the role of intellectual property rights in facilitating the financing of technological innovation as well as the role of policy makers, investors and managers in this process. The book's central finding is that public policy plays a key role in promoting the corporate disclosure of intellectual property-related information to enhance the efficiency of capital markets. This not only reduces the costs of capital for technology-driven firms but ultimately spurs innovation and economic growth. Intellectual Property Rights and the Financing of Technological Innovation will strongly appeal to research students and academics, policy makers, intellectual property professionals, equity analysts, credit rating analysts and executives in the pharmaceutical industry.
Book Synopsis An Empirical Analysis of Analysts' Cash Flow Forecasts by : Mark L. DeFond
Download or read book An Empirical Analysis of Analysts' Cash Flow Forecasts written by Mark L. DeFond and published by . This book was released on 2003 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study investigates the relatively recent and growing trend in analysts making operating cash flow forecasts. We find that cash flow forecasts are made for companies with accounting, operating and financing characteristics that are likely to make cash flows more helpful in interpreting earnings and assessing firm viability. Specifically, consistent with our expectations, we find that cash flow forecasts are more likely to be made for firms: (1) in industries with greater accounting choice heterogeneity; (2) with forecasted earnings losses;(3) with shorter operating cycles; (4) with greater capital intensity; and (5) with higher leverage. These findings suggest that market participants demand cash flow forecasts when cash flows are relatively more useful in assessing firm value. Supporting this explanation, we also find that analysts make cash flow forecasts when current cash flows have greater ability, and earnings have less ability, to predict future cash flows; when annual earnings have a lower association with stock returns; and when cash flow forecast errors are associated with stock returns around the earnings announcement date, but earnings forecast errors are not.
Book Synopsis Soft-talk Management Cash Flow Forecasts by : Michael Dambra
Download or read book Soft-talk Management Cash Flow Forecasts written by Michael Dambra and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
