The influence of accounting changes on analysts' forecast accuracy and forecasting superiority: evidence from the Netherlands

E. Peek

Research output: Contribution to journalArticleAcademicpeer-review


This study assesses the influence of discretionary accounting changes on financial analysts' individual forecast errors in the netherlands from 1988 to 1999. It contributes to previous research by examining whether accounting changes (1) influence analysts' earnings forecast accuracy; and (2) change analysts' forecasting superiority relative to a mechanical earnings prediction model because of the change in the time series and composition of earnings. The empirical results indicate that changes in accounting procedures can significantly affect analysts' forecast accuracy and forecasting advantage, conditional on the change-year effect, prior disclosure and the type of change. Specifically, this study finds that in the year that firms adopt accounting changes with a material effect on earnings before extraordinary items, analysts' forecast accuracy significantly worsens if the changes have not been previously disclosed. Further, in the earliest years after the adoption of changes from current cost accounting to historical cost accounting and changes from expensing to capitalization analysts' forecast accuracy and forecast superiority significantly improves, whereas analysts' forecast accuracy and superiority significantly worsens after the adoption of other changes.
Original languageEnglish
Pages (from-to)261-295
Number of pages35
JournalEuropean Accounting Review
Issue number2
Publication statusPublished - 1 Jan 2005

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