The Relationship Between Analysts' Cash Flow Forecasts And Target Price Accuracy

Analysts have played the role of information intermediary in the capital market,which can alleviate the problem of information asymmetry to a certain extent.Analysts' reports continue to be valued by investors,so in recent years analysts have released cash flow forecasts in addition to earnings forecasts,and cash flow forecasts have gradually become an important part of analysts' reports.So,are the analysts' cash flow forecasts useful? Most of the tests for the usefulness of analysts' cash flow forecasts today are conducted by examining the relationship between the accuracy of analysts' cash flow forecasts and earnings forecasts,But the earnings are easily affected by the manipulation of managers.At the same time,some scholars have found that there is a direct relationship between cash flow forecasts and stock price,and guessed that there should be a link between cash flow forecasts and analysts' expectation of future stock price(target price)(Mohanram,2014).The target price provides a good perspective for testing the usefulness of the cash forecasts,because the accuracy of the target price needs to be compared with the market price,and the market price is not easily affected by the managers.Therefore,from the perspective of the accuracy of the target price,it is more objective and reliable to test the usefulness of the analysts' cash flow forecasts.This paper uses the data of A-share listed companies from 2002 to 2017 as a sample,using the propensity score matching method to study the relationship between analysts' cash flow forecasts and target price accuracy.Through empirical research,it is found that:(1)Under the same conditions,if the analysts provide cash flow forecasts,the target price will be more accurate(2)If the star analysts also provide cash flow forecasts,the target price will be more accurate.(3)The target price will be more accurate when the analysts provide a higher frequency of cash flow forecasts.(4)The accuracy of the analysts' cash flow forecasts is positively correlated with the target price accuracy.(5)For more challenging companies,the effect of analysts' cash flow forecasts to improve target price accuracy is more obvious.(6)For more challenging companies,the relationship between the accuracy of the analysts' cash flow forecasts and the accuracy of the target price is more pronounced.This paper examines the usefulness of analysts' cash flow forecasts by studying the relationship between analysts' cash flow forecasts and the accuracy of target prices.This approach is more reliable than verifying the usefulness of analysts' cash flow by using the accuracy of earnings forecasts,which can greatly improve the significant shortcomings that earnings forecasts may be manipulated by managers.At the same time,it is also conducive to alleviating the information asymmetry in the capital market,helping investors to make major investment decision-making behaviors,optimizing the allocation of resources,and improving the operational efficiency of the capital market.