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Copyright of Contemporary Accounting Research is the property of Canadian Academic Accounting Association and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This article investigates the role of mandatory interim financial reporting in financial analysts' annual earnings forecast errors. We provide large-scale evidence from 49 countries that a mandatory quarterly (as compared to semi-annual) reporting regime is associated with lower analysts' annual earnings forecast errors. This conjecture is further supported when we exploit an exogeneous change in the mandatory frequency regime from a semi-annual to a quarterly reporting mandate in Japan. Consistent with an improvement in the information environment, our findings are more pronounced for firms and analysts subject to higher information acquisition costs and in countries where the institutional setting is less able to meet analysts' information needs. We corroborate this conjecture by documenting that more frequent mandatory reporting decreases analysts' forecast dispersion and improves the profitability of their stock recommendations. Overall, our findings extend the research on the role of the institutional setting in analysts' output, suggesting that the mandate of more frequent reporting improves analysts' forecasting process. [ABSTRACT FROM AUTHOR]

Exploiting two quasi-natural experiments, we find that firms increase emissions of toxic pollution following decreases in analyst coverage. The effects are stronger for firms with low initial analyst coverage, poor corporate governance, and firms subject to less stringent monitoring by environmental regulators. Decreases in environmental-related questions raised in conference calls, an increased cost of monitoring to institutional shareholders, reductions in pollution abatement investment, and the weakening of internal governance related to environmental performance are channels through which reduced analyst coverage contributes to increases in firm pollution. Our study highlights the monitoring role analysts play in shaping corporate environmental policies. [ABSTRACT FROM AUTHOR]

This paper investigates the association between life insurers' voluntary disclosure of embedded value (EV), an unregulated market-driven fair value measure, and analyst forecast accuracy and dispersion. EV is an estimate of the present value of future net cash flows from in-force life insurance business. Advocates of this disclosure believe that EV is a better measure of economic performance than traditional GAAP measures. Others argue that corporate management has discretion in estimating and reporting EV. Further, analysts may have access to information that allows the development of possibly more accurate estimation metrics in the absence of EV disclosure. It is then an empirical issue to determine whether EV disclosure has any incremental effect on analysts' forecast properties. Using a multi-country setting, we find that EV disclosure is positively associated with analysts' earnings forecast accuracy and negatively related to forecast dispersion. This result is consistent with the alternative hypothesis that disclosure of EV provides a richer information set that enriches analysts' forecasts beyond their own in-house developed surrogates. As guidance for insurance accounting and disclosure evolves, our findings support the value of continuing to provide EV information to the public. [ABSTRACT FROM AUTHOR]

Copyright of Contemporary Accounting Research is the property of Canadian Academic Accounting Association and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This paper investigates whether and how analysts' ESG orientation affects corporate green innovation in China. We find that ESG‐oriented analysts in brokerage firms with strong ESG performance significantly stimulate the target firms' green innovation. Mechanism analyses suggest that ESG‐oriented analysts enhance the anticipated benefits of corporate environmental risk management, and reduces the costs associated with managerial myopia and financial frictions. The effect could not be fully explained by analysts' competence. Our findings are robust to propensity score matching and difference‐in‐differences analyses. We provide valuable insights into the crucial role of analysts' ESG values in driving innovation‐oriented corporate sustainability. [ABSTRACT FROM AUTHOR]

Industrial organization economists and financial analysts often employ firm level Tobin's q, typically interpreted as the firm's market value divided by its book value. The measurements, applications, and interpretations vary considerably enough to warrant the questioning of its usefulness. This paper develops a conceptual framework for Tobin's q and, in doing so, offers some useful interpretations that hopefully clear up some of the past misunderstandings regarding this useful metric. [ABSTRACT FROM AUTHOR]

Conference calls provide opportunities for chief executive officers (CEOs) to inform market participants (i.e., financial analysts and investors) about their companies' prospects. Much research has focused on how CEOs speak about business-related topics in these calls, yet surprisingly the literature has not considered how statements that go beyond financial information affect market participants. When we explored archival data of how CEOs of publicly traded U.S.-based companies from the Russell 3000 Index spoke about COVID-19 in conference calls as the pandemic began in 2020, we noticed that about half of CEOs made "human care statements" that expressed a concern for people, with seemingly little direct financial relevance. However, although these statements were largely generic, vague expressions rather than clear plans, we discovered that the more such statements CEOs made, the better their companies fared on the stock market when stock prices tumbled globally. Follow-up explorations unveiled a negative association between CEO human care statements and stock volatility, meaning that market participants discounted these companies' future earnings less. Our explorations suggest that it pays off for CEOs to go beyond mere financial information and show some humanity, with implications for downstream theorizing about CEO impression management. [ABSTRACT FROM AUTHOR]

This paper examines the relationship between the voluntary disclosure of intangible assets and financing constraints using a sample of 2850 listed companies from 2017 to 2021. Additionally, we examine the moderating effects of prudence in accounting and the attention given to the disclosures by analysts from both an internal and an external perspective. The results show that voluntarily disclosing intangible assets helps to alleviate a firm's financing constraints, with more significant effects observed in state-owned enterprises and companies listed on the Growth Enterprise Market index than for private enterprises and those listed on the main board of the Chinese capital market. Further, conservatism in accounting and attention given by financial analysts both positively moderate this relationship. The theoretical and empirical insights provided by this study should help listed companies in China to enhance the quality of their voluntary intangible asset disclosures, while also helping to mitigate financing constraints. [ABSTRACT FROM AUTHOR]

This paper investigates how incentives generated by intrafirm tournaments affect the informativeness of bold forecasts issued by sell‐side analysts who have recently switched employers. Prior literature suggests that bold forecasts may lose accuracy when they are influenced by tournament‐induced incentives. Extending this literature, I find that bold forecasts from transitioning analysts tend to result in decreased forecast accuracy. This negative effect is mitigated when analysts are less concerned about their disadvantages in the new intrafirm tournament—specifically, when they are more experienced, more competent, or have moved to more prosperous brokerage houses. These findings suggest that bold forecasts by transitioning analysts are partly influenced by intrafirm tournament‐induced risk‐taking, which can deteriorate performance quality. [ABSTRACT FROM AUTHOR]

We employ a novel machine learning technique to classify analysts' forecast revisions into five types based on how the revision weighs publicly available signals. We label these forecast types as quant, sundry, contrarian, herder, and independent forecasts. Our tests reveal that a greater diversity of forecast types within the consensus is associated with increased consensus dispersion and improved consensus accuracy. Additionally, consensus diversity is associated with an improved information environment for firms, as reflected in reduced earnings announcement information asymmetry and volatility, higher earnings response coefficients, and faster price formation. Our study sheds light on how analysts revise their forecasts and documents capital market benefits associated with different analyst forecasting approaches. [ABSTRACT FROM AUTHOR]

Unlike institutional investors, who have expertise in collecting and analyzing firm information to predict firms' future performance, individual investors have a limited ability to conduct this task. Therefore, individual investors are known to commonly rely on financial analysts' earnings forecasts, which are freely available to them. However, as demonstrated by numerous studies, financial analysts' forecasts are not always accurate and free from bias. Drawing on screening theory and the innate financial and structural differences between highly franchised restaurants and their less franchised peers, the current study showed that analysts provide more accurate and less optimistically biased forecasts for the former than the latter. However, the positive impact of an additional number of analysts on the accuracy of forecasts was weaker for the former than the latter. The current study can help individual investors in the restaurant industry improve their understanding of financial analysts' earnings forecasts and make better-informed investment decisions. [ABSTRACT FROM AUTHOR]

Copyright of Contemporary Accounting Research is the property of Canadian Academic Accounting Association and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

We investigate the effect of scrutiny (e.g. credit ratings, analyst reports, or mandatory disclosures) on the security design problem of a privately informed issuer. We show that scrutiny has important implications for both the form of security designed and the amount of inefficient retention of cash flows. The model predicts that issuers will design informationally sensitive securities (i.e. levered equity) when scrutiny is sufficiently intense. Otherwise, issuers opt for a standard debt contract. Scrutiny increases efficiency by decreasing issuers' reliance on retention to signal quality and, perhaps counterintuitively, decrease price informativeness. [ABSTRACT FROM AUTHOR]

Combining novel data on analyst employment history and mutual fund commission payments, we show that client funds generate higher returns on stocks for which they have access to research by industry expert analysts. The outperformance is greater when funds are more important clients and cannot be attributed to tipping. Client funds place modestly higher weights on stocks covered by industry expert analysts and allocate more commissions to brokers providing such coverage. For identification, we exploit exogenous analyst coverage disruptions. Our findings contribute to the debate on whether mutual funds obtain any investment value from access to analysts through the soft-dollar arrangement. Authors have furnished an Internet Appendix , which is available on the Oxford University Press Web site next to the link to the final published paper online. [ABSTRACT FROM AUTHOR]

We show that analyst behavior changes in response to a randomly assigned shock that exogenously varies the timeliness and cost of accessing mandatory disclosures in the cross-section of investors: analysts reduce coverage and issue less optimistic, more accurate, less bold, and less informative forecasts. Our evidence indicates that analysts reduce a strategic component of their behavior: the changes are stronger among analysts with more strategic incentives like affiliated or retail-focused analysts. We conclude that mandatory disclosure can substitute for analyst information production, which is constrained by investors' ability to verify forecasts using corporate filings. Authors have furnished an Internet Appendix , which is available on the Oxford University Press Web site next to the link to the final published paper online. [ABSTRACT FROM AUTHOR]

There are significant differences among sell-side analysts in how frequently they revise recommendations. We show that much of this variation is an analyst-individual trait. Analysts who change recommendations more slowly make recommendations that are more influential and generate better portfolio returns. Slower-revising analysts tend to change recommendations following corporate news that are harder to interpret by nonstock experts, and our evidence suggests that their investment value derives from their ability to better interpret hard-to-assess information. On average, analysts change recommendations less frequently as their career progresses; however, recommendation speed-style is the dominant predictor of their recommendation value. [ABSTRACT FROM AUTHOR]

Copyright of Contemporary Accounting Research is the property of Canadian Academic Accounting Association and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Copyright of Contemporary Accounting Research is the property of Canadian Academic Accounting Association and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Publicly listed firms have discretion to disclose (or not) advertising spending in their annual (10-K) reports. The disclosure of advertising spending can provide valuable information because advertising is a leading indicator of future performance. However, estimates of advertising spending are available from data providers, arguably mitigating the need for its formal disclosure. This article argues that firms' disclosure of advertising spending provides more complete and public information and therefore lowers investor uncertainty about future firm performance (idiosyncratic risk). Empirical analyses show that the effect is largely driven by the negative effect of disclosure of advertising spending on analyst uncertainty. Consistent with agency theory, the negative effect of the disclosure of advertising spending on analyst uncertainty is stronger for firms with more financial resources, firms with lower disclosure quality, and firms that are in more competitive industries. Additional analyses show that the disclosure of advertising spending has a significant positive effect on firm value in specific sectors. These results, therefore, identify an avenue for chief marketing officers to play a greater role in managing investor relations. In addition, they suggest strong merit for the Securities and Exchange Commission and the Financial Accounting Standards Board to reconsider current regulations governing advertising spending disclosure. [ABSTRACT FROM AUTHOR]

This study constructs fixed-effects models based on a sample of Chinese A-share manufacturing companies listed from 2012 to 2021, to examine the impact and mechanisms of financial analysts' attention on the quantity and quality of enterprise green innovation (EGI). The study draws the following conclusions: (1) Analysts' attention positively promotes the quantity and quality of EGI. (2) The relief of financing constraints from information-revealing effects mediates the relationship between analysts' attention and EGI quantity, while the external monitoring effect improves corporate Environmental, Social, and Governance (ESG) performance and mediates the relationship between analysts' attention and EGI quality. (3) The relief of financing constraints has a masking effect on the relationship between analysts' attention and the improvement of EGI quality due to executives' short-sightedness. But the external monitoring effect of analysts' attention can have a curbing effect on this. (4) In the heterogeneity test, it is found that for better performing firms, analysts' attention promotes the improvement of the EGI quality. However, for poorer performing firms, the effect is not significant as the performance pressure effect is more pronounced. This study emphasizes the significant impact of analysts' attention on external monitoring of EGI quality compared to other research. The findings support the need for relevant policies to guide and strengthen the external monitoring effect of analysts' attention in practice, as well as the development of differentiated environmental regulation policies for firms with different characteristics. [ABSTRACT FROM AUTHOR]

We propose a method to identify the informativeness of a future scheduled announcement at the daily level, exploiting the discontinuity it creates in the term structure of option volatility. We implement the strategy in a panel data model to estimate the relation between prior signals and the future announcement. This method allows us to separate substitutes from complements, it can isolate multiple signals within the same quarter, and it can condition on the timing and signal characteristics. We find that analyst forecasts substitute earnings announcement information and that recommendations do not provide extra information on top of forecasts. Moreover, our evidence suggests that insiders sell to avoid uncertainty when the announcement is far away but pull forward earnings information when they trade one month before. This paper was accepted by Eric So, accounting. Funding: This publication is part of the project "Eliciting the properties of private signals" (with project number VI.Veni.201E.029 of the research program VENI SGW, which is (partly) financed by the Dutch Research Council (NWO). Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2023.4970. [ABSTRACT FROM AUTHOR]

This study seeks to investigate the potential of utilizing the metaverse environment to enhance the ability of financial analysts in detecting financial fraud. A preregistered randomized controlled experiment was conducted, which involved two control groups of participants discussing financial statements onsite and via video conference, and an experimental group utilizing a metaverse environment. The results revealed that the experimental group's performance in terms of the accuracy of fraud detection surpassed that of the two controlled groups. This outcome may be attributed to the enhanced usage of data visualization and more proactive participation of female participants. This study provides valuable insights into the potential benefits of employing metaverse technology in corporate finance and informs future collaboration strategies for financial analysts in fraud detection. [ABSTRACT FROM AUTHOR]

Previous research provides conflicting results regarding how R&D expenditures impact market value. Given that financial analysts are the primary intermediaries between companies and investors, our study focused on the impact of R&D-related uncertainty, growth, and information asymmetry associated on analysts' earnings forecasts. Based on 19,834 firm-year observations in the European market between 2005 and 2020, our results show that R&D activities lead to higher absolute forecast error and negative forecast error, indicating higher forecast inaccuracy with an optimistic bias. Additionally, these investments contribute to higher forecast dispersion, indicating disagreement among financial analysts. The comparison between 17 industries revealed that these effects are more pronounced in R&D-intensive industries than in non-R&D industries, uncovering the varied relationship between R&D investments and analyst forecasts across sectors. [ABSTRACT FROM AUTHOR]

This study investigates the impact of firm-level investor sentiment derived from Twitter and news media on herding behavior among contributors on Estimize, a leading platform for crowdsourced earnings forecasts. The findings show that sentiment gleaned from tweets and news media content positively influences herding among Estimize contributors. Notably, herding intensifies when Twitter and news sentiment polarities align, while divergent sentiment polarities diminish this herding effect. Additionally, the analysis indicates that firms with investment-grade ratings and those characterized by low valuation uncertainty are particularly prone to sentiment-driven herding. Importantly, positive sentiment is identified as having a more potent influence on herding behavior than negative sentiment. By focusing on Estimize contributors, this study offers insights into how firm-level sentiment cues shape the crowd's herding behavior, offering new perspectives on how different media sources shape the wisdom of the crowd. [ABSTRACT FROM AUTHOR]

We investigate the role of financial analysts in product quality failures. Relying on information about product recalls, we first show that analyst coverage on average reduces product quality, particularly when managers face greater short-term pressure from institutional investors. However, after identifying a subgroup of analysts who raise questions on product-related issues in earnings conference calls, we find that coverage by these "product analysts" enhances rather than compromises product quality. Firms with greater product analyst coverage are also more likely to retire low-quality products. Additional analysis demonstrates that product analysts help safeguard product quality by further probing into product-related matters and issuing more timely recommendation downgrades after firms announce product deficiencies. [ABSTRACT FROM AUTHOR]

Despite the prevalence and importance of humor in interpersonal communication, the disclosure literature is silent on the use of humor in the context of corporate communication. Using a sophisticated machine learning algorithm, we identify managers' successful uses of humor during public earnings conference calls. When managers use humor on an earnings call, stock market returns and analyst forecast revisions following the call are more positive, primarily because of a muted response to negative earnings news. Consistent with managers' successful use of humor being a favorable signal of future firm performance, we find no evidence of a return reversal over the subsequent quarter, and managers' use of humor predicts more favorable news at the subsequent quarter's earnings announcement. Our study provides new evidence on the use of humor in corporate disclosures, and our findings indicate that humor can meaningfully influence the market response to public earnings conference calls. [ABSTRACT FROM AUTHOR]

In the current financial landscape, earning management is a complex issue that raises questions about the credibility of financial data and the efficacy of corporate governance. This paper, through the use of logistic regression, analyzes the determinants of earning management within Moroccan companies. The findings underscore the pivotal role of corporate governance, revealing that well-governed companies are less susceptible to manipulation. Companies burdened with debt are more inclined to manipulate their financial data, and company size demonstrates a positive correlation with an increased likelihood of manipulation. Conversely, financially successful companies display a reduced susceptibility to earning management. These results carry significant practical implications for financial analysts, corporate governance professionals, and regulators, emphasizing the urgent need to reinforce governance, monitor debt management, and implement control mechanisms to mitigate the risk of earning management. They also stress the importance of increased vigilance on the part of regulators to maintain transparency in financial markets. Finally, this study calls for future research to refine an understanding of this intricate phenomenon and aid in preventing earning management within Moroccan companies. [ABSTRACT FROM AUTHOR]

Copyright of Contemporary Accounting Research is the property of Canadian Academic Accounting Association and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

We study the importance of peer effects among sell-side analysts who work at the same brokerage house, but cover different firms. By mapping the information network within each brokerage, we identify analysts who occupy central positions in the network. Central analysts incorporate more information from their coworkers and produce better research. Using shocks to network structures around brokerage mergers, we identify the influence of peer effects and the importance of industry expertise on analysts' performance. A portfolio strategy that exploits the forecast revisions of central analysts earns up to 24% per annum. [ABSTRACT FROM AUTHOR]

Using satellite imagery of retail firms' parking lots to measure time-varying local firm-specific performance, we document that analysts incorporate local information into their forecasts. Analysts rely more on local signals when less firm-wide information is available. This incorporation of noisy local firm information has firm-level implications. Examining across industries, we find causal evidence that geographic concentration of analysts increases consensus forecast errors and decreases firm liquidity. These effects are stronger for harder-to-value stocks. The market values geographic firm information, as the abnormal return around forecast revisions is higher for analysts who cover a firm from a unique location. [ABSTRACT FROM AUTHOR]