Timeliness of Accounting Earnings and Target Price Forecasts

This study empirically analyzes how timeliness affects financial analysts' achievement of target stock price and forecast accuracy. Timeliness is the degree to which information is available to decision-makers promptly. This study employs 2,746 firm-year observations from 2002 to 2018. Our sample comprises all of the firms listed on the Korea Composite Stock Price Index (KOSPI) market. The results of this study are as follows. First, This study finds that there is a significant association between timeliness of earnings and analysts’ target price achievement. Second, we find evidence that greater timeliness increases the accuracy of target price forecasts issued by financial analysts. In addition, through additional analysis, this study attempts to generalize the research results by re-verifying them using various measures of timeliness and target stock price prediction ability used in previous studies to ensure robustness. The results of this study have a unique contribution compared to previous studies in that it analyzed the relationship between a company's level of timeliness and financial analysts' ability to predict target stock prices. This study finds that when profit information for the current period is provided promptly, the quality information that financial analysts can use for corporate analysis increases and the ability to predict target stock prices becomes more accurate. Second, while most previous studies focused on the profit forecasting ability of financial analysts, this study focuses on the financial analyst's ability to predict target stock prices.