OCI information and analysts' forecast accuracy: Evidence from US commercial banks

This study investigates whether financial analysts accurately incorporate other comprehensive income (OCI) and its components into earnings per share (EPS) forecasts. Using a sample of 200 of the US's largest commercial banks from 2011 to 2020, our findings suggest that only OCI available for sale securities (AFS) and OCI Currency exhibit a positive and significant relationship with forecast accuracy, while cash flow hedges increase forecast error. Furthermore, additional robustness tests are conducted, revealing that large OCI AFS securities enhance analysts' forecast accuracy as financial analysts have expertise in interpreting these figures. In addition, the accounting standard update (ASU 2016-01) leads to decline in forecast accuracy. Moreover, OCI debt securities negatively impact forecast accuracy. However, analysts have gained more experience and insight into forecasting cash flow hedges and foreign currency translation, compared to the challenges posed by understanding ASU 2016-01.