The Influence Of Company Factors On The Accuracy Of Financial Analysts’ Earnings Forecast

Securities analyst is professional who services to institutions and individual investorswith providing investment analysis advice and guiding their investment behavior. Theseinvestors in the securities market cannot target their information collecting veryspecifically by analyzing abundant materials because of their limitations of the expertiseand the lower level of analysis. Securities analysts appear to fill the gap because theirforecasts effectively provide guidance for investors in profit forecast. Therefore, theresearch about improving Securities Analyst forecast accuracy becomes very important inpractice. This study was doing this job in order to find the antecedents of forecast accuracy,which has a very important practical significance for the securities market efficiency.Based on the summary of the researches in academia, GEM listed companies werecollected as a study sample which were concern by securities analysts in2010-2011. Fourbasic factors of the company, the basic characteristics of the company, the company’sfinancial characteristics, corporate governance, company information disclosure status ofthese companies, were studied by multiple linear regression model which gave theanalysis of the influence to earnings forecast accuracy. Conclusions were as follows:(1) Securities analyst profit forecast error was divided into three states as highreliability, accuracy, and occur significant prediction error. We found that theproportion of the sample size of the first two states contribute nearly60%, indicating arelatively high forecast accuracy for listed companies on GEM by securities analyst. Ifforecast error was divided into two groups of study in which one group was greater thanzero and anther was less than zero, the results show that the earnings forecast error isgreater than zero, which means Securities analyst earnings forecast was optimistic positivedeviation.(2) This paper divided company factors into four aspects, the basic characteristics ofthe company, the company’s financial characteristics, corporate governance andinformation disclosure quality. The research results show that the degree of diversificationof the listed companies, intangible assets accounted were negatively correlative withearnings forecast accuracy, meanwhile the listed companies profit predictability, capacity development, information disclosure quality and earnings forecast accuracy is relatedpositively.(3) The earnings forecast errors are divided into optimistic positive deviation andpessimistic negative deviation for empirical research. The study results show that earningsvolatility and net profit growth rate, the proportion of institutional ownership affectsecurities analysts predict negative deviations.