Security analysts' earnings forecasts as a measure of firm performance: An empirical exploration of its domain

Abstract

Purpose

The purpose of this paper is to investigate the domain of security analysts' earnings forecasts as a valid measure of firm performance.

Design/methodology/approach

A survey instrument was developed and sent to 1,350 security analysts to ascertain the criteria they used in evaluating firm performance.

Findings

Factor analysis indicates strong support for organizational level variables, such as top management, CEO ability, corporate culture, size as opposed to environment and industry level variables.

Research limitations/implications

The domain of security analysts' earnings forecasts is broader than traditional accounting‐ and market‐based measures and more closely matches the realm of the strategic management field.

Practical implications

The study presents new evidence that key organizational variables influence security analysts' earnings forecasts.

Originality/value

The present study is the first to the best of one's knowledge that ascertains the factors that security analysts utilize in making earnings forecasts for the firms they follow.

Citation

Sambharya, R.B. (2011), "Security analysts' earnings forecasts as a measure of firm performance: An empirical exploration of its domain", Management Decision, Vol. 49 No. 7, pp. 1160-1181. https://doi.org/10.1108/00251741111151190