Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

High‐Technology Intangibles and Analysts’ Forecasts

High‐Technology Intangibles and Analysts’ Forecasts This study examines the association between firms’ intangible assets and properties of the information contained in analysts’ earnings forecasts. We hypothesize that analysts will supplement firms’ financial information by placing greater relative emphasis on their own private (or idiosyncratic) information when deriving their earnings forecasts for firms with significant intangible assets. Our evidence is consistent with this hypothesis. We find that the consensus in analysts’ forecasts, measured as the correlation in analysts’ forecast errors, is negatively associated with a firm’s level of intangible assets. This result is robust to controlling for analyst uncertainty about a firm’s future earnings, which we also find to be higher for firms with high levels of internally generated (and expensed) intangibles. Given that analyst uncertainty increases and analyst consensus decreases with the level of a firm’s intangible assets, we also expect and find that the degree to which the mean forecast aggregates private information and is more accurate than an individual analyst’s forecast increases with a firm’s intangible assets. Finally, additional analysis reveals that lower levels of analyst consensus are associated with high‐technology manufacturing companies, and that this association is explained by the relatively high R&D expenditures made by these firms. Overall, our results are consistent with financial analysts augmenting the financial reporting systems of firms with higher levels of intangible assets (in terms of contributing to more accurate earnings expectations), particularly R&D‐driven high‐tech manufacturers. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Accounting Research Wiley

High‐Technology Intangibles and Analysts’ Forecasts

Loading next page...
 
/lp/wiley/high-technology-intangibles-and-analysts-forecasts-noUKSf2qCW

References (11)

Publisher
Wiley
Copyright
University of Chicago on behalf of the Institute of Professional Accounting, 2002
ISSN
0021-8456
eISSN
1475-679X
DOI
10.1111/1475-679X.00048
Publisher site
See Article on Publisher Site

Abstract

This study examines the association between firms’ intangible assets and properties of the information contained in analysts’ earnings forecasts. We hypothesize that analysts will supplement firms’ financial information by placing greater relative emphasis on their own private (or idiosyncratic) information when deriving their earnings forecasts for firms with significant intangible assets. Our evidence is consistent with this hypothesis. We find that the consensus in analysts’ forecasts, measured as the correlation in analysts’ forecast errors, is negatively associated with a firm’s level of intangible assets. This result is robust to controlling for analyst uncertainty about a firm’s future earnings, which we also find to be higher for firms with high levels of internally generated (and expensed) intangibles. Given that analyst uncertainty increases and analyst consensus decreases with the level of a firm’s intangible assets, we also expect and find that the degree to which the mean forecast aggregates private information and is more accurate than an individual analyst’s forecast increases with a firm’s intangible assets. Finally, additional analysis reveals that lower levels of analyst consensus are associated with high‐technology manufacturing companies, and that this association is explained by the relatively high R&D expenditures made by these firms. Overall, our results are consistent with financial analysts augmenting the financial reporting systems of firms with higher levels of intangible assets (in terms of contributing to more accurate earnings expectations), particularly R&D‐driven high‐tech manufacturers.

Journal

Journal of Accounting ResearchWiley

Published: May 1, 2002

There are no references for this article.