Is Analyst Forecast Accuracy Associated with Accounting Information Use?

In 1994, the AICPA?s Special Committee on Financial Reporting recommended that participants in business reporting can improve the reporting process by focusing on user needs and finding cost-effective ways of aligning business reports with those needs. The Committee noted that professional financial analysts are among the most important users of business reporting and that an examination of their accounting information needs would provide useful insight to the profession. Further, the Committee suggested that an investigation of the link between information usage and decision quality could provide a starting point for determining whether currently reported business information is relevant. The current study examines the relation between the forecast accuracy of financial analysts and specific accounting information items used during financial statement analysis. Findings indicate that relatively more accurate analysts tend to emphasize different information items prior to issuing an earnings forecast than do less accurate analysts. Study results also provide evidence of an association between specific accounting information items and decision quality