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The reliability of pre-listing earnings forecasts on the JSE

The reliability of pre-listing earnings forecasts on the JSE E Mbuthia and M Ward* INTRODUCTION 1. the South African Institute of Chartered Accountants (SAICA). Background 1.1 SAICA Audit and Accounting Guide, Profit Forecasts Prior to listing a company on the JSE Securities (1989), expressly prohibits any opinion that might Exchange (JSE), the directors of a company, assisted reveal the accountant's agreement with the accuracy by professional advisors, decide on a price at which to of the profit forecasts. The role of the reporting offer the company's equity to potential investors. The accountant is simply to report that the assumptions process of equity-pricing takes into consideration used in the preparation of the forecast have been factors such as: reasonable. The accuracy of the forecast can only be determined after the fact. • future earnings prospects, 1.2 Features of earnings forecast accuracy • the stock exchange sector, An examination of the literature raises various considerations about a variety of material factors that • overall market sentiment, may affect and/or determine the accuracy of earnings forecasts. • present and future capital requirements, and The first of these is statistical by nature. Once • economic conditions. management and their professional advisors have accurately plotted their earnings forecasts, it is Fundamental to this http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Investment Analysts Journal Taylor & Francis

The reliability of pre-listing earnings forecasts on the JSE

Mbuthia, E; Ward, M
Investment Analysts Journal , Volume 32 (57): 8 – Jan 1, 2003
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Publisher
Taylor & Francis
Copyright
© 2003 Taylor and Francis Group, LLC
ISSN
2077-0227
eISSN
1029-3523
DOI
10.1080/10293523.2003.11082446
Publisher site
See Article on Publisher Site

Abstract

E Mbuthia and M Ward* INTRODUCTION 1. the South African Institute of Chartered Accountants (SAICA). Background 1.1 SAICA Audit and Accounting Guide, Profit Forecasts Prior to listing a company on the JSE Securities (1989), expressly prohibits any opinion that might Exchange (JSE), the directors of a company, assisted reveal the accountant's agreement with the accuracy by professional advisors, decide on a price at which to of the profit forecasts. The role of the reporting offer the company's equity to potential investors. The accountant is simply to report that the assumptions process of equity-pricing takes into consideration used in the preparation of the forecast have been factors such as: reasonable. The accuracy of the forecast can only be determined after the fact. • future earnings prospects, 1.2 Features of earnings forecast accuracy • the stock exchange sector, An examination of the literature raises various considerations about a variety of material factors that • overall market sentiment, may affect and/or determine the accuracy of earnings forecasts. • present and future capital requirements, and The first of these is statistical by nature. Once • economic conditions. management and their professional advisors have accurately plotted their earnings forecasts, it is Fundamental to this

Journal

Investment Analysts Journal – Taylor & Francis

Published: Jan 1, 2003

References

  • Financial packaging of IPO firms in China.
  • The accuracy of earnings forecasts in IPO prospectuses on the Kuala Lumpur Stock Exchange.
  • The accuracy and rationality of earnings forecasts by UK analysts.
  • Earnings predictability and bias in analysts' earnings forecasts
  • The accuracy of profit forecasts in initial public offering prospectuses.
  • IPO profit forecasts and their role in signalling firm value and explaining post-listing returns”.
  • Price performance of newly listed shares on the Johannesburg Stock Exchange.
  • UK analysts' earnings forecasts.
  • Earnings management and the long-term under-performance of initial public stock offerings.