What question did this study set out to answer?

This study aims to evaluate the relationship between accounting changes and analysts' forecast errors regarding earnings.

Accounting Changes and Earnings Predictability.

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Prior analysis shows forecast errors linked to accounting changes, indicating challenges for analysts' adjustments.

This study aims to evaluate the relationship between accounting changes and analysts' forecast errors regarding earnings.
Analyzed diverse accounting changes, both voluntary and mandatory.
Utilized various sources for earnings forecasts.
Compared forecast biases in change years against non-change years.
Employed a matched-pairs design for industry and firm-specific control.
Analysts often fail to fully adjust forecasts for earnings effects of accounting changes.
Observed a generally insignificant relationship between forecast errors and earnings effect of changes.
Forecast errors increased during accounting change years, especially without prior information.
A significant negative correlation was found between forecast revisions and the income impact of changes.

Elliott et al. (1990) studied this question.

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