Do analysts’ cash flow forecasts help investors?

This study examines the effect of analysts’ cash flow forecasts on accruals mispricing. We find that investors tend to overestimate the information in accruals but that accrual mispricing is significantly lower for the firms with analysts’ cash flow forecasts. Our results suggest that these forecasts improve the efficiency of investors’ reactions to earnings announcements by conveying information on accrual components of reported earnings.