Knowledge that Transforms

This study investigates the recent trend in analysts disseminating operating cash flow forecasts. We find that analysts tend to forecast cash flows for firms where accounting, operating and financing characteristics suggest that cash flows are useful in interpreting earnings and assessing firm viability. Specifically, we find that analysts tend to forecast cash flows for firms with (1) large accruals, (2) more heterogeneous accounting choices relative to their industry peers, (3) high earnings volatility, (4) high capital intensity, and (5) poor financial health. These findings are consistent with financial analysts responding to market-based incentives to provide market participants with value-relevant information.

Recent advances in information technology allow firms to provide broader access to their disclosures. We examine the determinants and effects of the decision to provide unlimited real-time access to conference calls (i.e., “open” conference calls). Our evidence suggests that the decision to provide open calls is associated with the composition of a firm's investor base and, to some degree, the complexity of its financial information. We also find that open calls are associated with a greater increase in small trades (consistent with individuals trading on information released during the call) and higher price volatility during the call period.