Accuracy of forecasts is essential for organizational units, such as accounting. The accuracy of business–related forecasts generally depends on individual and organizational biases. Biases, resulting from anchoring and adjustment heuristics, incentivization for earnings management as a personal objective, and company goals alter the forecaster’s opinion on the future outcome. Studies in business analytics suggest that detectable forecasting patterns occur, if these biases are present. This paper argues that a bias not only distorts forecast revisions, but –depending on the importance level of the bias– that the goal to produce accurate forecasts has a marginalized influence in the presence of the bias. Such a bias supersedes the previous goal and recommends a disentanglement of the forecasting process. Empirical analysis of judgmental cash flow forecasts in a business corporation supports the hypothesis for an organizational bias. Concealment of information goes along with this bias, alters forecast revisions, and has a substantial impact on the forecasting process. Therefore, incorporation of the findings into future organizational arrangements, strategic understanding, and accounting information systems is necessary.
Knöll, Florian, "The Goal of Forecasting – Predictability of Cash Flow Revisions in Corporate Finance" (2018). Research Papers. 175.