The Source of Optimism in Financial Analysts' Earnings Forecast:A Literature Review

The conclusion is that precision of analysts earnings forecast is enhanced by increasing in the numbers of analysts and by improving on earnings predictability and information disclosure.

The paper uses a series of error measure standards to compare the accuracy of earnings forecasts between companies of H share and Red Chips and local firms of Hong Kong Our findings show that the accuracy of firms of H share and Red Chips is more accurate than that of local companies of Hong Kong.

The related factors influencing management voluntary earning forecasts of listed companies involves several perspectives concerning the structure of board of directors,independence of audit committee,management incentive compensation,outside factors(earning forecasts from financial analysts respectively and CPA auditing).

Thus,before making investment decisions by taking advantage of the earnings notices,investors are advised to take careful considerations of the choices of the opportunistic disclosure when the management is faced with financial risks;the regulatory authorities should do the same when constituting the relevant provisions on the surplus notice.