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In this paper we concentrate on the agency relationships between financial analysts and other parties and the impact of these relationships on profit forecasts published by the analysts. We assume that the considerable investment in financial analysis reflects the importance of this process in the capital market and justifies research into the practice of financial analysis. Our analysis concentrates on the forecasting process largely because this is the most visible of the services that the analysts offer to the market. Nevertheless we accept that earnings forecasting may not be the most important of these services (Barker, 1998) but in illuminating the agency relationships that surround earnings forecasting we will also shed light on the more general agency issues involved. We find the both analysts and fund managers are well aware of the biases and irrationalities inherent in the forecasting process and that these are …