The relation between accounting quality and security analysts' target price forecast performance

Abstract

Using a sample of the US security analysts' target price forecasts issued over the period 2000-2010, we examine whether accounting quality affects security analysts' target price forecast performance. We find that analysts' 12-month-ahead target price forecasts for the firms with higher accounting quality are more accurate and have higher possibilities of being met at some time during or at the end of the forecast horizon. These results are consistent with the fact that accounting quality has significant impact on analysts' target price forecasts and that higher accounting quality results in more accurate target price forecasts.