We theorize that accounting systems affect analysts' forecast accuracy through changes in earnings variability. We argue that the matching and historical cost principles reduce earnings variability, and hence, reduce analysts' earnings forecast errors. We also argue that restricting the choice...

An examination of analysts' accuracy in predicting annual earnings for firms reporting losses and firms reporting profits finds that analysts are ten times more accurate in predicting the earnings of profit firms. They have also improved their predictive ability for profit firms since the...

We argue that accounting conservatism makes earnings forecasting difficult by introducing transitory components in reported earnings. These transitory components are likely to be disproportionately represented in firms reporting losses. We show that analysts' mean forecast errors and absolute...