Instead of existing research studying the relation between
forecast errors and either of two accounting-conservatism forms (unconditional,
conditional) respectively, this paper studies the relation between forecast
errors and two forms simultaneously, and finds that the relation varies across
industries. For large industries, when a firm adopts higher unconditional
conservatism and lower conditional conservatism, forecast errors are smaller.
Small industries show that a firm with lower unconditional conservatism and
higher conditional conservatism has smaller forecast errors. These findings
imply that forecast errors and accounting conservatism appear to be related.
This information could be of interest to both investors and firm managers.
JEL classification numbers: C32, G30
conservatism; Unconditional conservatism; Conditional conservatism; Forecast errors;