Management forecasts and information asymmetry: an examination of bid-ask spreads

Article Abstract:

A study was conducted to examine if there is a relationship between the decision to release a management earnings forecast and information asymmetry in the market. This research also aimed to ascertain if forecasts lead to the reduction of the information asymmetry. An analysis of bid-ask spreads over 12-month and nine-day periods before management earnings forecasts revealed that the spreads of forecasting firms are greater than those of non-forecasting firms over the two pre-forecast timeframes. In addition, analysis of bid-ask spreads for forecasting firms near the management forecast date showed that the spreads of forecasting firms steadily increase over the 12 months before the forecast. Lastly, a momentary increase in spreads was observed the day of and after the management forecast although spreads in the nine-day period after the forecast are smaller than those in the nine-day period prior the forecast.

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Using Value Line and IBES analyst forecasts in accounting research

Article Abstract:

A comparison of forecast errors for different combinations of the Value Line Investment Survey, the Institutional Brokers Estimate System (IBES), and Compustat actual and forecast quarterly earnings per share (EPS) illustrates the importance of actual EPS data selection rather than the source of analysts' forecast data in accounting research. The most suitable source of EPS actuals is perceived to be from Value Line. The smallest forecast errors were observed in forecasts taken from a combination of Value Line-IBES using Value Line-IBES actual EPS. Substantially large forecast errors were observed for a combination of Compustat actual data and either the Value Line or IBES forecast data. The high level of association noted in the use of Value Line actual data is attributed to the judgement applied by Value Line in reporting data.

Statistics, Information services, Business forecasting, Value Line Investment Survey (Periodical)

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An empirical investigation of the market for audit services in the public sector

Article Abstract:

Audit fees of 100 North Carolina (NC) county governments between 1980-1984 are examined. These factors include differences between audit fees due to county financial and political issues, as well as auditor changes and county debt structure. Findings indicate that there are significant relationships between audit fees and politics, but not between fees and financial matters. There are also relationships between audit fees and the level of county debt. Finance and politics jointly are not considered to significantly change yearly audit fees. This could be due to NC's strict monitoring of all its counties.

Analysis, Auditing, Practice, Political aspects, North Carolina, Auditors, Local finance

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