- Title: Ms
- Position: PhD Student - Department of Accounting and Corporate Governance
- Load: PhD Student Part Time
- Principal supervisor: Doctor Susan Wright
- Associate supervisor: Mr Steven Wu
- Date of submission: 21/06/2014
- Thesis title: Understanding Sources of Accuracy and Inaccuracy in Australian Analysts Earnings Forecasts.
- Purpose: This study examines the relations between the intensity of reported exploration activity by mining and exploration companies and analysts’ private information search activities and their forecast accuracy. Under Australian accounting standards, firms can either record exploration expenditure as an expense as it is incurred, or as an exploration asset (i.e., exploration expenditure is capitalised). The accounting choice for exploration expenditure could have potential impact on analysts’ forecasts. It also examines the relations under the different accounting treatment for exploration expenditure.
- Originality: This study examines whether greater intensity of exploration activity motivates analysts to acquire and process relatively more private information to meet investor demand and whether this affects the accuracy of analysts’ consensus forecast. It also examines whether the capitalisation of exploration expenditure can reduce uncertainty analysts have about the future economic outcomes of exploration investments, and improve the accuracy of their forecasts.
- Findings: The study finds that the proportion of private information contained in analysts’ forecasts increases with the intensity of exploration activity. We also find that the accuracy of analysts’ consensus forecast improves with the intensity of exploration activity. The results are robust for firms choosing to capitalise their exploration expenditure.
- Research limitations/implications: Using the extractive industry as a specific setting, this study evaluates the role of analysts in moderating high information asymmetry exhibited in this industry. The findings are useful to investors and academics because it addresses how accounting matters when investing.
- Keywords: Exploration intensity, analysts’ forecasts