Abstract: The reputation of financial analysts in China is doubted by more and more market participants, yet the issuance of cash-flow forecasts by financial analysts is increasing. Based on the institutional background, this paper investigates why financial analysts issue the cash-low forecast of the listed firms, through which we can examine the decision procedure of analysts’ forecasts. Empirical results show that financial analysts are more likely to issue cash-flow forecasts if they work in a large and experienced brokerage house that covers a small number of industries. Further, financial analysts are more willing to give cash-flow forecasts in relation to the firms with sound corporate governance, simple business and significant operating risks. These results imply that when analysts are making cash-flow forecasts decisions, they consider mainly their personal advantages and firms’ characteristics. Their decisions are based on benefit-cost maximization principle. This research can provide new evidence on how investors should regard financial analysts’ role in Chinese capital market and correspondingly make a better use of analyst reports.

Key words: information supply, analysts' personnel characteristics, analysts' cash-flow forecasts