Do Auditor’s Efforts of Interim Review Curb the Analyst Forecast’s Walkdown?

• 발행기관: 한국유통과학회
• 저자명: Jaeyon CHU Eun-Sun KI
• 간행물 정보: 『The Journal of Asian Finance, Economics and Business(JAFEB)』Vol. 6 No.2, 45~54쪽, 전체 10쪽
• 주제분류: 경제경영 > 경제학
• 파일형태: PDF
• 발행일자: 2019.04.30

영문 초록

This study examines whether auditors restrain the analysts’ opportunistic behavior as reviewing the companies’ interim reports. Analysts forecasts show a walkdown pattern in which their optimism has decreased as the earnings announcement date has approached. At the beginning of the year, there is a lack of high-quality benchmark information that enables information users to judge the accuracy of analyst’s earnings forecasts. Thus, early in the year, analysts are highly inspired to disseminate optimistic forecasts in order to gain manager’s favor. In this study, we examine adequate benchmarks prevent analysts from disclosing optimistically biased forecasts. We conjecture that auditors’ efforts might mitigate analysts’ walkdown pattern. To test this hypothesis, we use data from Korea, where it is mandatory to disclose auditor’s review hours. We find that the analyst forecast’s walkdown decreases with the ratio as well as the number of audit hours. It implies that an auditor s effort in reviewing interim financial information has a monitoring function that reduces analysts opportunistic optimism at the beginning of the year. We conjecture that the tendency will be more pronounced when BIG4 auditors review the interim reports. Consistent with the prediction, BIG4 auditors’ interim review effort is more effective in suppressing the analysts’ walkdown.

목차

1. Introduction

2. Literature Review & Hypotheses

3. Research Design

4. Empirical Results

5. Conclusions

References

키워드

Earnings Forecast Walkdown Interim Financial Information Auditor Review Hour