The information content of analysts' book value per share forecasts

Equity analysts' earnings forecasts exclude dirty surplus income items, otherwise known as other comprehensive income (OCI). However, OCI affects firm value on a dollar-for-dollar basis and can enhance investors' understanding of the value and risk of firms' equity capital. Focusing on financial firms and using analysts' book value per share (BVPS) forecasts as a proxy for forward-looking information about OCI, we examine whether analysts provide information about future OCI, whether investors respond to OCI innovations, and whether OCI innovations are more useful to investors in financial firms with difficult-to-value assets. We find: 1) Analysts' BVPS forecasts generally incorporate future OCI; and, 2) The market responds to BVPS forecast misses, with stronger evidence for firms with larger holdings of difficult-to-value financial assets. The evidence suggests that analysts at least partially incorporate future OCI into their BVPS forecasts for these firms, and that this information is useful to investors. Our study provides a useful input into bank and insurance regulators' evaluations of regulatory capital requirements, especially important given the market volatility experienced in the global financial crisis of 2007-2009 and recently