An empirical study of forecasts in prospectuses issued by New Zealand companies : recent evidence
This study examined the accuracy and bias of profit forecasts disclosed in prospectuses by New Zealand companies for initial public offerings (IPOs) from 1987 to 1994, and some of the determinants of accuracy and bias. Accuracy was measured by absolute relative errors, while bias was measured by signed relative errors. The sign test was used to examine the accuracy and bias. Both univariate and multivariate analyses were performed to examine the relationships between forecast accuracy and bias and the independent variables, namely, previous trading history, forecast period, company size, industry grouping and the year of forecast. A final sample of 90 useable forecasts was obtained from 54 prospectuses issued by newly listed companies. The results showed that profit forecasts disclosed by newly listed companies between 1987 and 1994 were, on average, more accurate than those prior to 1987. However, the evidence failed to support the hypothesis that profit forecasts are accurate. In examining forecast bias, the evidence showed that the forecasts were, on average, pessimistic to a small degree, but did not reject the hypothesis that profit forecasts are unbiased. In the univariate analysis, forecast accuracy was found to be significantly related to previous trading history, forecast period, company size and the year of forecast. However, in the regression analysis, only the year of forecast and company size were significantly related to forecast accuracy. Forecast bias was found to be significantly related only to company size in the univariate analysis. In the regression analysis, previous trading history and the year 1987 were found to be significantly related to pessimistic forecasts, while only the year 1987 was significantly related to optimistic forecasts.... [Show full abstract]
Keywordsinitial public offering; forecast error; prospectus; newly listed company; profit forecast; forecast accuracy; forecast bias; earnings forecasts
Access RightsDigital thesis can be viewed by current staff and students of Lincoln University only. Print copy available for reading in Lincoln University Library.
Showing items related by title, author, creator and subject.
Wong Janet (Lincoln University, 1995)The high rate of new product failure is decreased through the use of new product forecasting models (NPFMs). There is a particular lack of studies and applications of NPFMs in the NZ (New Zealand) context. The purpose of ...
Mardle, D. W. (Lincoln University, 1993)This study holds as is its basic thesis that a well constructed econometric model containing an error-mechanism will provide superior forecasts. Such a model is developed within the methodology espoused by David Hendry and ...
Spaven, Peter J. (Lincoln University, 2004)This project was designed to combine pre-existing technologies and techniques to provide a customised interface to aid in the decision making process of river monitoring practices, it is a pilot study built using a variety ...