Reading Between the Lines: An Empirical Examination of Qualitative Attributes of Financial Analysts’ Reports

40 Pages Posted: 23 Feb 2011 Last revised: 14 May 2014

See all articles by Brady J. Twedt

Brady J. Twedt

University of Oregon - Lundquist College of Business

Lynn L. Rees

Utah State University - Huntsman School of Business

Date Written: September 1, 2011

Abstract

This paper examines whether two qualitative attributes of financial analysts’ reports, detail and tone, are significant in explaining how the market responds to analysts' reports, after controlling for the information contained in the reports' quantitative summary measures. Report detail is hypothesized to reflect the level of effort expended by the analyst in preparing the report, and therefore the usefulness of their intrinsic firm value estimates. Report tone is predicted to signal the analyst’s underlying sentiment regarding the firm and may be used to assess the extent to which analysts’ conflicts of interest interfere with the mapping of firm value estimates into stock recommendations. Consistent with these hypotheses, we find that the tone of financial analyst reports contain significant information content incremental to the reports’ earnings forecasts and recommendations, and report complexity (one component of report detail) helps explain cross-sectional variation in the market's response to the reports' recommendations.

Keywords: Analyst reports, Report detail, Report tone, Analyst stock recommendation, Analyst earnings forecast, Information content

JEL Classification: G10, M41

Suggested Citation

Twedt, Brady J. and Rees, Lynn L., Reading Between the Lines: An Empirical Examination of Qualitative Attributes of Financial Analysts’ Reports (September 1, 2011). Journal of Accounting and Public Policy, Vol. 31, pp. 1-21, 2012; Mays Business School Research Paper No. 2012-38. Available at SSRN: https://ssrn.com/abstract=1764604

Brady J. Twedt (Contact Author)

University of Oregon - Lundquist College of Business ( email )

Lundquist College of Business
1208 University of Oregon
Eugene, OR 97403
United States

Lynn L. Rees

Utah State University - Huntsman School of Business ( email )

3500 Old Main Hill
Logan, UT 84322-3500
United States
435-797-2272 (Phone)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
393
Abstract Views
1,965
rank
77,301
PlumX Metrics