Association Between Accounting Conservatism and Analysts’ Forecast Inefficiency*
Why this work is in the frame
A frame that forgets how it found something cannot be audited. These are the routes that admitted this work.
Bibliographic record
Abstract
Abstract We find that analysts’ earnings forecasts do not fully impound the implications of accounting conservatism. Forecast optimism is negatively associated with the magnitude of beginning‐of‐year balance sheet reserves (BSR), which are associated with conservative accounting in prior years. However, this result vanishes once we allow for the negative association, documented in several prior studies, between BSR and Basu’s asymmetric timeliness measure of conservatism [Journal of Accounting and Economics 24 (1997) 3] . After controlling for this association, we find that forecasters’ under‐reaction to bad versus good news is negatively associated with the magnitude of BSR. We obtain similar results after allowing for the positive association between asymmetric timeliness and Khan and Watts’ C_Score [Journal of Accounting and Economics 48 (2009) 132] . Therefore, our results are consistent with a subtle form of inefficiency of forecasts with respect to accounting conservatism; that is, analysts do not fully appreciate that the earnings of companies with lower BSR or higher C_Scores are likely to be both: (i) lower relative to forecast; and (ii) more asymmetrically timely than the earnings of companies exhibiting higher BSR or lower C_Scores.
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Full frame distilled prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. Learned from the 10,348 direct Codex labels and 10,348 direct Gemma labels. Candidate is the union of thresholded teacher heads; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels or direct frontier model labels.
Codex and Gemma teacher scores by category
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.002 | 0.023 |
| Meta-epidemiology (narrow) | 0.000 | 0.000 |
| Meta-epidemiology (broad) | 0.001 | 0.000 |
| Bibliometrics | 0.000 | 0.001 |
| Science and technology studies | 0.001 | 0.000 |
| Scholarly communication | 0.000 | 0.001 |
| Open science | 0.000 | 0.000 |
| Research integrity | 0.000 | 0.001 |
| Insufficient payload (model declined to judge) | 0.000 | 0.000 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from it