 Analyst rounding of EPS forecasts and stock recommendationsHenri Akono, Khondkar Karim and Emeka Nwaeze Advances in accounting, 2019, vol. 44, issue C, 68-80 Abstract: We examine the association between analysts' stock recommendations and their tendency to round annual EPS forecasts to nickel intervals (i.e. placing a zero or five in the penny location of the forecast). We find that prior to Regulation Fair Disclosure (Reg FD), analysts were more likely to provide rounded EPS forecasts in association with unfavorable (underperform and sell) recommendations. However, after Reg FD, we find no significant association between rounded forecasts and unfavorable stock recommendations. Further, other regulations (NASD 2711, NYSE 472, and Global Research Analyst Settlement) have no impact on analyst rounding behavior. The findings in this study suggest that analyst rounding behavior is a particular form of forecasting optimism motivated, at least in part, by management relations incentives. Further, Reg FD appears partially successful at curbing the influence of management relations incentives on analysts' research. Keywords: Rounding of EPS forecasts; Stock recommendations; Management relations incentives; Regulation Fair Disclosure; Analyst experience (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:advacc:v:44:y:2019:i:c:p:68-80 DOI: 10.1016/j.adiac.2018.10.002 Access Statistics for this article Advances in accounting is currently edited by Dennis Caplan More articles in Advances in accounting from Elsevier |
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