| This dissertation examines the relationship of firms' financial statement information (accounting quality) as perceived by financial analysts to the dispersions of financial analysts' forecasts of their one-year-ahead earnings per share and five-year-ahead growth in earnings. These measures of dispersion of financial analysts' forecasts can be construed as ex ante measures of firm risk. To examine the effect of accounting quality on dispersion of financial analysts' forecasts, a measure of accounting quality was obtained from the Financial Analysts' Federation's Corporate Information Committee's Report. A cross-sectional seemingly unrelated regression model was developed which incorporates, along with accounting quality, other independent variables which function as control variables. The dispersion measures are the dependent variables.;In analysis utilizing dummy industry variables, dispersion was found to be an industry phenomenon. In analysis conducted industry by industry, accounting quality was found to be related to dispersion in the electrical equipment, publishing, and health care industries. The electrical equipment, publishing, and health care industries have been found (in prior research) to be of moderate forecast difficulty. Based on these findings, one may be able to conclude that accounting quality may be more important to forecast dispersion in industries that are neither very easy nor very difficult to forecast. |
