Corporate Disclosure Policy and Analyst Behavior

ACCOUNTING REVIEW, Vol 71, No 4, October 1996

Posted: 16 Jun 1998

See all articles by Mark H. Lang

Mark H. Lang

University of North Carolina at Chapel Hill

Russell J. Lundholm

University of British Columbia - Sauder School of Business

Abstract

This paper examines the relation between the disclosure practices of firms, the number of analysts following each firm, and properties of the analysts' earnings forecasts. Using data from the Financial Analysts Federation Corporate Information Committee Report (FAF Report), we provide evidence that firms with more informative disclosure policies have a larger analyst following, more accurate analyst earnings forecasts, less dispersion among individual analyst forecasts and less volatility in forecast revisions. The results enhance our understanding of the role of analysts in capital markets. Further, they suggest that potential benefits to disclosure include increased investor following, reduced estimation risk and reduced information asymmetry, each of which have been shown to reduce a firm's cost of capital in theoretical research.

JEL Classification: G12, M41, M45

Suggested Citation

Lang, Mark H. and Lundholm, Russell J., Corporate Disclosure Policy and Analyst Behavior. ACCOUNTING REVIEW, Vol 71, No 4, October 1996. Available at SSRN: https://ssrn.com/abstract=2646

Mark H. Lang (Contact Author)

University of North Carolina at Chapel Hill ( email )

Kenan-Flagler Business School
McColl Building
Chapel Hill, NC 27599-3490
United States
919-962-1644 (Phone)
919-962-4727 (Fax)

Russell J. Lundholm

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

2053 Main Hall
Vancouver, British Columbia V6T 1Z2
Canada

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