Analyst information production and the timing of annual earnings forecasts

Sami Keskek (), Senyo Tse () and Jennifer Wu Tucker ()
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Sami Keskek: University of Arkansas
Senyo Tse: Texas A&M University
Jennifer Wu Tucker: University of Florida

Review of Accounting Studies, 2014, vol. 19, issue 4, No 7, 1504-1531

Abstract: Abstract We investigate whether the reputation-herding theory or the tradeoff theory explains variation in the timing of individual analysts’ forecasts. Using forecast accuracy improvements, forecast boldness, and the price impact of forecasts as measures of forecast quality, we find that in the information discovery phase that precedes an earnings announcement, earlier forecasts have higher quality than later forecasts. We also find a similar pattern in the information analysis phase that begins with the earnings announcement date. Our findings suggest that consistent with the herding theory, analysts who are more capable participate early in discovering and analyzing information, and therefore earlier forecasts in the information discovery and analysis phases are of higher quality than later forecasts in that phase.

Keywords: Financial analysts; Timing; Earnings announcements; Information discovery (search for similar items in EconPapers)
JEL-codes: D82 D83 G14 G20 (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1007/s11142-014-9278-7

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