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JOURNAL OF ACCOUNTING AND FINANCE

The Impact of Loss Incidence on Analyst Forecast Dispersion:

Uncertainty or Information Asymmetry

Author(s): Jorida Papakroni

Citation: Jorida Papakroni, (2013) "The Impact of Loss Incidence on Analyst Forecast Dispersion: Uncertainty or Information Asymmetry," Journal of Accounting and Finance, Vol. 13, Iss. 5, pp. 26 - 48

Article Type: Research paper

Publisher: North American Business Press

Abstract:

In this study we examine the effect of loss incidence on the analyst earning’ forecast dispersion, using

annual data for US firms over the period 1986-2011. We find strong positive relationship between the

loss incidence and forecast dispersion even when controlling for financial distress. We argue that the

significant impact of losses on the analysts’ earnings forecast dispersion is due to a combination of both

higher information asymmetry and higher uncertainty regarding the future value of the firm. As such, our

study provides a possible reconciliation for the different results provided by Ertimur (2004) and Ciccone

(2001) about the incidence of losses.