The specification of the market expectation of accounting numbers is a common feature of many empirical studies in accounting and finance. Givoly and Lakonishok (1979) found that financial analysts' forecasts have information content. This study evaluates the quality of analysts' forecasts as surrogates for the market expectation of earnings and compares it with that of prediction models commonly used in research. Results indicate that prediction errors of analysts are more closely associated with security price movements, suggesting that analysts' forecasts provide a better surrogate for market expectations than forecasts generated by time-series models. The study also identifies factors that might contribute to the performance of the financial analysts'forecasts. The broadness of the information set employed by analysts and, to a lesser extent, their reliance on information released after the end of the fiscal year appear to be important contributors to their performance.

Timeliness of annual reports is an important determinant of their usefulness. This study examines several aspects of the timeliness of earnings announcements which have implications for regulatory actions as well as for research design. The results show a considerable shortening of the reporting lag over the years. This implies that the assumption conveniently made in many "event studies" that the announcement week or month is fixed over the years is inappropriate and tends to weaken the power of the tests. The reporting lag of individual companies appears to be more related to intra-industry patterns and tradition than to company attributes. The ability of most companies to report welt ahead of the filing deadline coupled with the finding that bad news tends to be delayed might be considered in assessing the adequacy of the length of the current filing period. The price reaction to the disclosure of early earnings announcements was significantly more pronounced than the reaction to late announcements suggesting a decrease in the information content as the reporting lag increases.