Accruals quality and analyst coverage

Gerald J. Lobo, Minsup Song and Mary Stanford

Journal of Banking & Finance, 2012, vol. 36, issue 2, 497-508

Abstract: We provide evidence that analyst coverage increases as accruals quality decreases. This finding is consistent with the services of financial analysts becoming more valuable and in greater demand as accruals provide weaker signals about future cash flows. Further, it is accruals quality associated with innate uncertainty in the firm’s operating environment that attracts analysts even after controlling for operating uncertainty associated with cash flow and stock return volatility. This suggests that low quality accruals provide an opportunity for analysts to benefit from generating private information. Consistent with analysts providing compensating information, we find that forecasts for firms with lower accruals quality contain more private information.

Keywords: Analyst coverage; Accruals quality; Information asymmetry; Private information; Operating uncertainty (search for similar items in EconPapers)
JEL-codes: G17 G24 M41 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (36)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426611002524
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:36:y:2012:i:2:p:497-508

DOI: 10.1016/j.jbankfin.2011.08.006

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().