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The article focuses on how the characteristics of both the financial analyst and the analyst's report influence investors' reactions to information in the report. The study found that investors' reactions to financial analysts' research reports depend not only on the incentives of the analyst issuing the report but also on his conclusion about the stock. While individual investors have numerous sources of information available to them, they consider analysts' research reports among the most influential sources for investment decision making. In these reports, analysts attempt to present important facts in a manner that will be informative and useful to investors. The psychology literature indicates that if a message is consistent with the recipient's expectations, the recipient is more likely to attribute the communicator's position to the reasons which generated the premessage expectancy than to the available facts. When investors received a favorable research report, they judged the report to be consistent with their expectations that analysts tend to issue favorable reports and that investment-banking analysts tend to issue more favorable reports than noninvestment-banking analysts.

In the present study, managers and seniors reviewed simulated workpapers containing both mechanical and conceptual errors. It was hypothesized that managers would be more accurate than seniors at detecting conceptual errors, while seniors would be more accurate at detecting mechanical errors. The results support the hypotheses. Finding such differences supports current practice in many accounting firms: seniors perform detailed, mechanical reviews and managers perform general, conceptual reviews. The next section of the paper discusses the review process and the hypotheses. The research methods and the results are contained in sections 3 and 4, respectively. The last section provides a discussion of the results and implications for future research. [ABSTRACT FROM AUTHOR]

Criticizes the study `Some determinants of Analysts' Forecast Accuracy,' by Dipankar Ghosh and Stacey M. Whitecotton. Author's job description of a financial analyst; Components of the issue of forecast accuracy; Conclusions.