Journal article
Analyst information acquisition and the relative informativeness of analyst forecasts and managed earnings
SF Schantl
Accounting and Business Research | Routledge - Taylor & Francis | Published : 2018
Abstract
Mixed empirical evidence exists on whether equity analyst forecasts complement (‘interpretation role’) or rather substitute for (‘information role’) the informativeness of corporate earnings. This paper develops a theoretical model in which an analyst acquires costly information to forecast the fundamental information contained in a subsequently released and strategically manipulated earnings announcement. The manager is assumed to manipulate earnings such that his objectives – an uncertain price interest and meeting-or-beating the analyst forecast incentives – are optimized. The model shows that the manager’s incentives are the source of the two roles of the analyst information in the valua..
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Funding Acknowledgements
This paper is an amended version of a chapter of my Ph.D. thesis at the University of Graz. I am indebted to the members of my thesis committee, Ralf Ewert (co-chair), Paul Fischer and Alfred Wagenhofer (co-chair), for their guidance and helpful comments on this paper. Comments from two anonymous referees as well as the editors are very much appreciated. The paper has also benefited greatly from discussions with Mirko Heinle and Ro Verrecchia during a research stay at the University of Pennsylvania in 2012/2013. Financial support for this stay by the DART program and the Faculty of Social and Economic Sciences of the University of Graz is gratefully acknowledged.