The Effect of SFAS No. 141 and SFAS No. 142 on the Accuracy of Financial Analysts' Earnings Forecasts after Mergers Page: 63
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CHAPTER 9
CONCLUSIONS, IMPLICATIONS, AND LIMITATIONS
Findings
This study examined the impact of SFAS 141, 142 on the accuracy of financial
analysts' earnings forecasts after mergers. Specifically, I hypothesized lower forecast
error of future earnings for companies that experienced mergers after the adoption of
SFAS 141, 142 than for those who went through business combinations before those
accounting changes.
Test results provide strong evidence that earnings forecast errors for companies
involved in merging and acquisition activity decreased after the adoption of SFAS 141,
142. Test results also suggest that this decrease of earnings forecast errors is
attributable to factors specific to merging companies but not common to merging and
non-merging companies. Test results also present evidence, although weaker, that this
decrease is due to changes in business combination reporting required by SFAS 141,
142.
I also conducted sensitivity analysis of study results to analysts' rankings. Using
the methodology that defines analyst as a leader or a follower based on the timeliness
of his/her forecasts relative to forecasts of other analysts for the same company
(Cooper et al. 2001; Shroff et al. 2003), I concluded that the overall increase in earnings
forecast accuracy for merging firms in the post-SFAS 141, 142 environment results from
the increased accuracy of leaders but not followers.63
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Mintchik, Natalia Maksimovna. The Effect of SFAS No. 141 and SFAS No. 142 on the Accuracy of Financial Analysts' Earnings Forecasts after Mergers, dissertation, May 2005; Denton, Texas. (https://digital.library.unt.edu/ark:/67531/metadc4731/m1/70/: accessed April 18, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; .