The Accuracy of Earnings Forecasts Disclosed in IPO Prospectuses: The Case of Turkish IPO Companies


METU Studies in Development, no.37, pp.221-245, 2010 (Peer-Reviewed Journal)

  • Publication Type: Article / Article
  • Publication Date: 2010
  • Journal Name: METU Studies in Development
  • Journal Indexes: EconLit
  • Page Numbers: pp.221-245
  • Karadeniz Technical University Affiliated: Yes


This paper examines the accuracy of earnings forecasts made by Turkish Initial Public Offering (IPO) companies during the period 2002-2007. It is a voluntary requirement for the Turkish IPOs to furnish earnings forecasts. The accuracy of earnings forecasts is measured by forecast errors, absolute forecast errors and squared forecast errors in this paper. A number of company specific characteristics such as size, age, forecast interval, gearing and proportion of shares retained by owners are tested. Additionally, both auditing firm and underwriter reputation are tested as well. The results of this study show that like IPO forecasts disclosed in most other countries, IPO forecasts disclosed by Turkish companies do overestimate their earnings, on average, by 13.44 %. On an overall basis, the findings of this study can be intrepreted to mean that IPO forecasts disclosed by Turkish companies provide reliable information.