Review of Accounting Studies

, Volume 16, Issue 1, pp 59–88

Analysts’ accrual-related over-optimism: do analyst characteristics play a role?


  • Michael S. Drake
    • Fisher College of BusinessThe Ohio State University
    • Sam M. Walton College of BusinessUniversity of Arkansas

DOI: 10.1007/s11142-009-9118-3

Cite this article as:
Drake, M.S. & Myers, L.A. Rev Account Stud (2011) 16: 59. doi:10.1007/s11142-009-9118-3


Bradshaw et al. (J Acc Res 39:45–74, 2001) find that analyst forecast over-optimism is greater for firms with high accruals. This “accrual-related over-optimism” is generally interpreted as evidence that analyst forecasts do not fully incorporate predictable earnings reversals associated with high accruals. We investigate whether analyst experience, access to resources (brokerage size), and portfolio complexity moderate the relation between over-optimistic forecasts and high accruals. We demonstrate the robustness of accrual-related over-optimism to controls for cash flow and prior forecast errors. We find that accrual-related over-optimism is lower for analysts with greater general experience and for analysts following fewer firms but find only limited evidence of lower accrual-related over-optimism for analysts from larger brokerages and for analysts following fewer industries.


Analyst forecastsAnalyst experienceBrokerage sizeAnalyst optimismWorking capital accruals

JEL Classification


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© Springer Science+Business Media, LLC 2009