Measuring Market Expectations

We find that analyst forecasts of earnings per share occur in nickel intervals at a much greater frequency than do actual earnings per share. Analysts who round their earnings per share forecasts to nickel intervals exhibit characteristics of analysts who are less informed, exert less effort, and have fewer resources. Rounded forecasts are less accurate and the negative relation between rounding and forecast accuracy increases as the rounding interval increases from nickel to dime, quarter, half-dollar, and dollar. An examination of announcement period returns reveals that market expectations more closely align with consensus forecasts including rounded forecasts and then correct toward the more accurate consensus forecasts excluding rounded forecasts. Finally, exclusion of rounded forecasts decreases forecast dispersion.

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Market Expectations of a Warming Climate

Journal of Financial Economics ◽

10.1016/j.jfineco.2020.08.019 ◽

2021 ◽

Author(s):

Wolfram Schlenker ◽

Charles A. Taylor

Keyword(s):

Warming Climate ◽

Market Expectations

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The expectation differences among stakeholders in the financial valuation fitness of auditors

Journal of Applied Accounting Research ◽

10.1108/jaar-06-2013-0043 ◽

2016 ◽

Vol 17 (1) ◽

pp. 43-60 ◽

Cited By ~ 3

Author(s):

James Anthony DiGabriele

Keyword(s):

Response Bias ◽

Financial Statements ◽

Fair Value ◽

Content Type ◽

Financial Valuation ◽

University Curriculum ◽

Expectation Gap ◽

Significant Difference ◽

Accounting Practitioners ◽

Market Expectations

Purpose – The purpose of this paper is to investigate if there is an expectation gap among accounting academics, accounting practitioners, and users of financial statements in the financial valuation fitness of auditors. Complex reporting standards and current market expectations have the potential to create differences between what third-party users consider to be the responsibilities of the auditor and what auditors believe to be their responsibilities in auditing fair value estimates. Design/methodology/approach – This study surveys the perceptions of accounting academics, accounting practitioners, and users of financial statements and the degree to which an expectation gap exists in the financial valuation fitness of auditors. Survey respondents chose from a five-point Likert scale ranging from “strongly agree” to “strongly disagree.” Findings – This paper proposes two hypotheses. The results for all nine survey items have provided significant evidence that there is a difference in the expectation of the financial valuation fitness of auditors between users of financial statements and accounting practitioners (H1). Additionally, the findings for all survey items present support there is a significant difference in the expectation of the financial valuation fitness of auditors between accounting academics and users of financial statements (H2). Research limitations/implications – A limitation of the current study, as an inherent attribute with survey research, is non-response bias. The only way to evaluate this was to test late responses to earlier results. There were no significant results in these analyses. According to Fink (2003), if there are no significant differences in this indicator the likelihood of non-response bias is extremely low. Hence, this limitation did not have serious implications on the current study. Practical implications – The implications of this study affect the accounting academic community as they prepare students in response to the evolving market expectations (Pan and Perera, 2012). Previous research has pointed toward the sluggish reaction for change in the accounting curriculum relative to external demands (Harvey, 2004; Pan and Perera, 2012). The results of this study also have resonating effects for accounting practitioners. The marketplace expects accountants to be “knowledge professionals” (Carnegie and Napier, 2010). Regulators continue to ask auditors to find more fraud and understand financial valuation (Pan and Perera, 2012). Social implications – Contemporary accounting practice is moving beyond the scope of quantitative recording of historical financial information. Ignoring integral market transformations could result in lower quality audits with corresponding increased litigation against auditors for negligence (Pearson, 2011). Originality/value – This study is important for several reasons. First, users of financial statements have expressed the necessity for auditors to acquire financial valuation skills (Christensen et al. (2012). Therefore, the evidence obtained from users of financial statements in this research will be critical guidance to reconcile expectations. Second, accounting educators have not provided a significant response to teaching fair value concepts in the university curriculum (Carlino, 2012; Hanson, 2013). This research presents a clarion call to accounting educators to align university curriculum toward market expectations (Christensen et al., 2012). Third, the practitioner community has also been criticized for audit deficiencies in fair value. It is critical to understand if additional training in financial valuation is necessary to improve the fair value judgments of practitioners and meet stakeholder’s expectations. Accordingly, the study provides a contribution to practice. Finally, this paper answers the call by Christensen et al. (2012) for future research on the topic of fair value: to “mirror the categories of recommendations of regulators and standard setters.”

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