잠재적보통주가 재무분석가 예측오차에 미치는 영향

초록

Dilutive securities such as convertible bonds and bonds with warrants can potentially reduce earnings per share by increasing the number of common shares outstanding. The purpose of reporting diluted EPS is to communicate potential dilution effects of dilutive securities. However, the diluted EPS is only recognized on the financial statements when dilution lowers EPS, but financial analysts will incorporate dilution effects when stock price is higher than exercise price of dilutive securities. This study examines how financial analysts incorporate dilution effects and tests the dilution effects by analyzing financial analysts' forecast errors. EPS is net income divided by the number of common shares outstanding. Dilution effects will have very little impact on net income, but will directly affect the number of shares. Thus, EPS forecast errors will be mainly related to share forecast errors. To analyze the effects of dilutive securities on the financial analysts' forecast errors, this study uses the sample which consists of manufacturing firms listed on Korean Stock Exchange during 2001-2007. The sample includes all companies having analysts' forecasts. The results shows that share based measure is positively related to financial analysts' forecasts errors, but the EPS based measure is not. These results indicate that the diluted EPS reported on the income statements does not fully convey the dilution information anticipated by analysts for their earnings forecasts. There are several contributions for accounting research and practitioners. First, the results of this study indicate that diluted EPS does not fully communicate the dilution information of dilutive securities and share based dilution measure is more effective than diluted EPS based measure. These results may be helpful for accounting regulators to set and revise accounting standards in the future. Second, this study examine financial analysts' forecast errors more profoundly by breaking-down EPS forecast errors into net income forecast errors and number of share forecast errors.

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