| Summary: | 碩士 === 輔仁大學 === 金融研究所 === 83 === This Thesis attempts to qualify the reasonable basis criterion
imposed on management forecasts. First nineteen lead indicators
of corporate future earnings are derived from historical
financial statements and macroeconomic forecasts. These
earnings lead indicators (ELIs) consist of three grops:
operating and financial strength, industrial competitive
strength, and macroeconomic outlook. Next, multiple regression,
step-wise regression, and factor analysis are utilized to
explain both management forecasts (MFs) and forecast errors
(MFEs). Based on the explanatory power of ELIs on both MFEs,
managemrnt forecasts can be classified into four categories:
full utilization, sub-utilization, nil-utilization, and no
explanatory content of the ELIs. Since for the entire sample,
ELIs can explain MFs more than MFEs, we conclude that
management forecasts as a whole do have reasonable basis.
However, certain degree of improvement can be made by paying
more attention to the adequacy of bad-debt allowance when
generating earnings forecasts. In addition, the results are
affected by the year of forecasts and the industry
classification of the firms. The group of ELIs representing
industrial competitive strength is measured by the relative
operating and financial strength of a firm within an industry.
This group of ELIs is highly correlated with the group of ELIs
denoteing the absolute operating and financial strength of the
firm, hence, does not add much explanatory power to the model.
Future research may consider other measures of industrial
competitive strength as well as incorporate other industrial
forecasts and macroeconomic forecasts into the ELIs.
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