In this paper, we attempt to blend economic theory with an understanding of the historical context and regulation of Japanese financial markets, particularly during the 1950s and 1960s. The historical and regulatory context is critical since it represents the framework within which the economic forces operated. That is, we are interested in examining how a particular structure, characterized by controlled interest rates, segmentation of markets and functions, and limited entry, gave rise in understandable ways to distinctive corporate financial practices.

Technology has dramatically reduced the cost of disclosing information to investors and created new conduits for securities' sales. The result is stock ownership, both direct and indirect, has never been more widely distributed. Equally important, changes have occurred in the institutional market for new offerings. Bought deals, Internet road shows, the preeminence of mutual funds and pension funds, and foreign investors and issuers have changed the market. In the wake of these changes, the SEC's disclosure policy has evolved. The evidence suggests we have moved from a world where information was released relatively infrequently and with significant lags to a world where information is released relatively rapidly on a continuous basis to as many investors as possible.

In this study I propose and test a model that predicts individual analyst forecasts of corporate earnings per share (EPS) using the change in the mean consensus forecast of other analysts since the date of the analyst's current outstanding forecast; the deviation of the analyst's current forecast from the consensus forecast; and cumulative stock returns since the date of the analyst's current forecast. I find that these three variables explain about 38% of the variability in analyst forecast revisions. While there is evidence of a relation between changes in earnings expectations and price changes, virtually all of the explanatory power of my model arises from other analyst forecasts. Section 2 describes the data bases used and the sample selection process. Section 3 presents the model and method for predicting individual analyst forecasts. Section 4 reports the bias and accuracy of the predicted forecasts. Conclusions are in section 5.

Accounting History, Double-entry Bookkeeping, Negative numbers

Auditing, Sampling, Qualified opinion

Firm size, Excess returns, LIFO adoption, Tax savings

Mark E. Zmijewski, Methodological Issues Related to the Estimation of Financial Distress Prediction Models, Journal of Accounting Research, Vol. 22, Studies on Current Econometric Issues in Accounting Research (1984), pp. 59-82

Auditing, Internal controls, Audit judgement, Human information processes

Robert E. Verrecchia, The Use of Mathematical Models in Financial Accounting, Journal of Accounting Research, Vol. 20, Supplement: Studies on Current Research Methodologies in Accounting: A Critical Evaluation (1982), pp. 1-42

Accounting changes, LIFO, Market response, Annual earnings announcements