Do Corporate Disclosures Constrain Strategic Analyst Behavior?

65 Pages Posted: 8 May 2020

See all articles by Yen-Cheng Chang

Yen-Cheng Chang

National Taiwan University - College of Management; National Taiwan University - Department of Finance; National Taiwan University - Center for Research in Econometric Theory and Applications

Alexander Ljungqvist

Centre for Economic Policy Research (CEPR); Stockholm School of Economics; European Corporate Governance Institute (ECGI); Research Institute of Industrial Economics (IFN)

Kevin Tseng

National Taiwan University - Department of Finance; National Taiwan University - Center for Research in Econometric Theory and Applications

Multiple version iconThere are 2 versions of this paper

Date Written: April 2020

Abstract

We show that U.S. analysts alter their forecasting behavior in response to a randomly assigned shock that exogenously varies the timeliness and cost of accessing companies' mandatory disclosures in the cross-section of investors: analysts reduce the number of stocks they cover, issue less optimistic and more accurate forecasts that are less bold, and collectively reduce forecast dispersion. Our investigation of possible channels favors the explanation that analysts reduce the strategic component of their behavior: the changes are more pronounced among analysts with stronger incentives to strategically skew their forecasts, such as affiliated analysts and those catering to retail investors. We conclude that mandatory disclosure is a substitute for information production by analysts, whose behavior is constrained by investors' ability to verify their forecasts using corporate filings.

Suggested Citation

Chang, Yen-Cheng and Chang, Yen-Cheng and Ljungqvist, Alexander and Ljungqvist, Alexander and Tseng, Kevin, Do Corporate Disclosures Constrain Strategic Analyst Behavior? (April 2020). CEPR Discussion Paper No. DP14678, Available at SSRN: https://ssrn.com/abstract=3594311

Yen-Cheng Chang (Contact Author)

National Taiwan University - College of Management ( email )

Department and Graduate Institute of Finance
College of Management
Taipei 106
Taiwan

National Taiwan University - Department of Finance ( email )

1, Sec. 4, Roosevelt Road
Taipei, 106
Taiwan

National Taiwan University - Center for Research in Econometric Theory and Applications ( email )

1, Sec. 4, Roosevelt Road
Taipei, 106
Taiwan

Alexander Ljungqvist

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Stockholm School of Economics ( email )

111 60 Stockholm
Sweden

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Kevin Tseng

National Taiwan University - Department of Finance ( email )

1, Sec. 4, Roosevelt Road
Taipei, 106
Taiwan

National Taiwan University - Center for Research in Econometric Theory and Applications ( email )

1 Sec. 4, Roosevelt Road
Taipei 106, 106
Taiwan

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