Prediction of Earnings Forecasts: The Case of U.S. Multinationals

Prior accounting research has provided evidence of the information content of a company's actual or predicted accounting earnings. Prior studies have also found that factors such as firm size, industry, or systematic risk influence the accuracy of the earnings predictions. This study investigates the accuracy and the consensus among forecasters of earnings estimates for U.S. domestic and U.S. multinational corporations. Companies were classified into a domestic or multinational type for this research following the criteria established by Statement of Financial Accounting Standards No. 14 for required disclosure of foreign operations. The empirical results indicate that the accuracy of earnings forecasts is significantly lower for purely domestic firms than for U.S.-based multinationals. Likewise, the level of consensus in earnings estimates submitted by financial analysts is significantly lower for U.S. domestic than for U.S. multinational firms.© 1991 JIBS. Journal of International Business Studies (1991) 22, 265–288