The Effects of Disclosure and Analyst Regulations on the Relevance of Analyst Characteristics for Explaining Analyst Forecast Accuracy

Journal of Business Finance & Accounting, Forthcoming

48 Pages Posted: 25 Sep 2012 Last revised: 22 Jan 2017

Sami Keskek

University of Arkansas - Sam M. Walton College of Business

Linda A. Myers

University of Tennessee, Haslam College of Business, Accounting and Information Management

Thomas C. Omer

University of Nebraska at Lincoln - School of Accountancy

Marjorie K. Shelley

University of Nebraska at Lincoln - School of Accountancy

Multiple version iconThere are 2 versions of this paper

Date Written: November 1, 2015

Abstract

We posit and find an effect of disclosure and analyst reporting regulations implemented from 2000 through 2003 (including Regulation Fair Disclosure, the Sarbanes-Oxley Act, and the Global Settlement Act) on the importance of analyst and forecast characteristics for analyst forecast accuracy. Following the enactment of these regulations, more experienced analysts and All-Star analysts do not maintain their superior forecast accuracy, and analysts employed by large brokerage houses perform worse than other analysts. In addition, we find a decrease in the importance of analyst effort, the number of industries and firms followed, days elapsed since the last forecast, and forecast horizon. While the importance of bold upward forecast revisions does not change, bold downward revisions lose their relevance for forecast accuracy after 2003. Finally, we find an increase in the important of prior forecast accuracy. We find that the importance of these characteristics varies with the precision of publicly available information. Specifically, the decrease in the importance of most analyst and forecast characteristics and the increase in the importance of prior forecast accuracy are greater when the precision of publicly available information is low. Overall, our results suggest that the positive effects of experience, effort, brokerage house size, and All-Star status on forecast accuracy in the pre-regulation period were because of the information advantages that these analysts enjoyed (rather than their ability to generate private information). In contrast, our results suggest that prior forecast accuracy is related to analysts’ ability to generate private information.

Keywords: Analyst forecast errors, analyst disagreement, information uncertainty, private information

JEL Classification: M40, M41

Suggested Citation

Keskek, Sami and Myers, Linda A. and Omer, Thomas C. and Shelley, Marjorie K., The Effects of Disclosure and Analyst Regulations on the Relevance of Analyst Characteristics for Explaining Analyst Forecast Accuracy (November 1, 2015). Journal of Business Finance & Accounting, Forthcoming . Available at SSRN: https://ssrn.com/abstract=2151483 or http://dx.doi.org/10.2139/ssrn.2151483

Sami Keskek

University of Arkansas - Sam M. Walton College of Business ( email )

Fayetteville, AR 72701
United States

Linda A. Myers (Contact Author)

University of Tennessee, Haslam College of Business, Accounting and Information Management ( email )

Knoxville, TN
United States

Thomas C. Omer

University of Nebraska at Lincoln - School of Accountancy ( email )

307 College of Business Administration
Lincoln, NE 68588-0488
United States

Marjorie Shelley

University of Nebraska at Lincoln - School of Accountancy ( email )

307 College of Business Administration
Lincoln, NE 68588-0488
United States

Paper statistics

Downloads
201
Rank
122,602
Abstract Views
1,068