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Forecast Accuracy and Bias in IPO Prospectuses Recent New Zealand Evidence

Forecast Accuracy and Bias in IPO Prospectuses Recent New Zealand Evidence This study examines the accuracy and bias of profit forecasts disclosed in prospectuses by New Zealand companies for initial public offerings during the period 1987 to 1994. The results show that profit forecasts in this period are, on average, more accurate titan those disclosed prior to 1987, which were examined in prior studies. However, the results reject the null hypothesis that profit forecasts are accurate. In examining forecast bias, the evidence shows that the forecasts are, on average, somewhat pessimistic, but not sufficiently to reject the hypothesis that profit forecasts are unbiased. Tests of the determinants of error show that larger companies make more accurate forecasts, and forecasts made in the year 1987 are less accurate than in other years. Tests of the determinants of bias show that forecasts made in 1987 are also more optimistic, and that companies with longer trading histories and pessimistic forecasts make less biased forecasts. Forecast period and industry type are not significantly related to error or bias. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Pacific Accounting Review Emerald Publishing

Forecast Accuracy and Bias in IPO Prospectuses Recent New Zealand Evidence

LYDIA HSU, WENHSI; Hay, David; Weil, Sidney
Pacific Accounting Review , Volume 12 (1): 33 – Jan 1, 2000
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References (19)

Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
0114-0582
DOI
10.1108/eb037948
Publisher site
See Article on Publisher Site

Abstract

This study examines the accuracy and bias of profit forecasts disclosed in prospectuses by New Zealand companies for initial public offerings during the period 1987 to 1994. The results show that profit forecasts in this period are, on average, more accurate titan those disclosed prior to 1987, which were examined in prior studies. However, the results reject the null hypothesis that profit forecasts are accurate. In examining forecast bias, the evidence shows that the forecasts are, on average, somewhat pessimistic, but not sufficiently to reject the hypothesis that profit forecasts are unbiased. Tests of the determinants of error show that larger companies make more accurate forecasts, and forecasts made in the year 1987 are less accurate than in other years. Tests of the determinants of bias show that forecasts made in 1987 are also more optimistic, and that companies with longer trading histories and pessimistic forecasts make less biased forecasts. Forecast period and industry type are not significantly related to error or bias.

Journal

Pacific Accounting Review – Emerald Publishing

Published: Jan 1, 2000

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