Why Do Analysts Issue Long-Term Earnings Growth Forecasts? an Empirical Analysis‪.‬

INTRODUCTION While the extant literature (e.g., Chan, Karceski & Lakonishok, 2003) yields overwhelming evidence on the over-optimism and inaccuracy of long-term earnings growth (LTG) forecasts, it remains silent on why analysts issue these forecasts, a question that becomes even more intriguing given the more voluntary nature of LTG forecasts compared with their near-term counterparts. That is, why do some analysts issue for some companies LTG forecasts, which are often deemed as extremely inaccurate and overly optimistic, when they can choose not to? This study offers insights into this question by empirically examining four non-exclusive hypotheses: analysts issue LTG forecasts to signal their ability, to reveal their optimism, to please the management (since these forecasts are overly optimistic), and to satisfy investors' informational needs.