On the Relationship Between Analyst Reports and Corporate Disclosures: Exploring the Roles of Information Discovery and Interpretation

Journal of Accounting and Economics 49 (3): 206-226, April 2010

Posted: 18 Dec 2009 Last revised: 5 Mar 2014

See all articles by Xia Chen

Xia Chen

Singapore Management University

Qiang Cheng

Singapore Management University

Kin Lo

University of British Columbia (UBC) - Sauder School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: December 17, 2009

Abstract

We examine the relationship between analyst research and corporate earnings announcements to explore the relative importance of information discovery versus interpretation of previously released information. Using equity market reaction to capture information content, we find that information discovery (interpretation) dominates in the week before (after) firms announce their earnings. In addition, we find that the interpretation role increases in importance with the difficulty of financial accounting information. Analysis of all weeks surrounding earnings announcements shows that the information discovery role is overall more important. We are able to reconcile this result with the opposite finding in Francis et al. (2002).

Keywords: Analyst research, information content, earnings announcements, information discovery

JEL Classification: G14, G29, M41, M45

Suggested Citation

Chen, Xia and Cheng, Qiang and Lo, Kin, On the Relationship Between Analyst Reports and Corporate Disclosures: Exploring the Roles of Information Discovery and Interpretation (December 17, 2009). Journal of Accounting and Economics 49 (3): 206-226, April 2010. Available at SSRN: https://ssrn.com/abstract=1524864

Xia Chen

Singapore Management University ( email )

60 Stamford Rd.
Singapore 178900
Singapore

Qiang Cheng (Contact Author)

Singapore Management University ( email )

60 Stamford Road
Singapore, 178900
Singapore

Kin Lo

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
604-822-8430 (Phone)
604-822-9470 (Fax)

HOME PAGE: http://www.sauder.ubc.ca/Faculty/People/Faculty_Members/Lo_Kin

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