Can Sell-Side Analysts’ Experience, Expertise and Qualifications Help Mitigate the Adverse Effects of Accounting Reporting Complexity?

Review of Quantitative Finance and Accounting

60 Pages Posted: 26 Apr 2017 Last revised: 22 Feb 2021

See all articles by Rani Hoitash

Rani Hoitash

Bentley University - Department of Accountancy

Udi Hoitash

Northeastern University - Accounting Group

Ari Yezegel

Bentley University - Department of Accountancy

Date Written: February 19, 2021

Abstract

We examine the relation between accounting reporting complexity and analysts’ performance and whether analysts’ qualifications, experience, and expertise in specific financial domains help them more effectively process complex information. We document an inverse relation between complexity and analysts’ performance. Further, we show that analysts’ firm-specific experience, industry focus, and CFA certification alleviate some of the adverse effects of complexity, whereas analysts’ general experience does not appear to do so. Using an XBRL-based approach, we also develop new measures of analysts’ expertise and find that expertise in the areas of fair value, derivatives and pension are more valuable than other analyst characteristics in attenuating the negative effects of complexity arising from transactions and events in these areas. Overall, this study underscores the importance of analyst characteristics and the need to simplify the complex disclosures in the notes to the financial statements.

Keywords: XBRL, accounting complexity, financial analysts’ performance, financial analysts’ expertise; recognition vs. disclosure

JEL Classification: G24, G29, M41

Suggested Citation

Hoitash, Rani and Hoitash, Udi and Yezegel, Ari, Can Sell-Side Analysts’ Experience, Expertise and Qualifications Help Mitigate the Adverse Effects of Accounting Reporting Complexity? (February 19, 2021). Review of Quantitative Finance and Accounting, Available at SSRN: https://ssrn.com/abstract=2958417 or http://dx.doi.org/10.2139/ssrn.2958417

Rani Hoitash (Contact Author)

Bentley University - Department of Accountancy ( email )

175 Forest Street
Waltham, MA 02452-4705
United States

HOME PAGE: http://www.xbrlresearch.com

Udi Hoitash

Northeastern University - Accounting Group ( email )

360 Huntington Ave.
Boston, MA 02115
United States
671-373-5839 (Phone)

Ari Yezegel

Bentley University - Department of Accountancy ( email )

175 Forest Street
Waltham, MA 02452
United States
+1.781.891.2264 (Phone)

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