Analysts' Strategic Information Revelation in Conference Calls

Abstract

We study information revelation via analysts’ questions in earnings conference calls and its implications for firms’ information environments. Better-informed analysts (who have higher ex-ante forecast accuracy) reveal less new information in their questions than less-informed analysts. Consistent with strategic safeguarding of their information advantage, analysts reveal less (more) information when exposed to strong competition (high information uncertainty). Information revelation is linked to ex-post benefits (higher absolute forecast accuracy) and costs (lower relative forecast accuracy) to analysts. Finally, it is associated with the informativeness of managers’ answers and affects trading volume, bid-ask spreads, and returns. We conclude that analysts’ strategic information revelation shapes firms’ information environments.

Keywords: financial analysts, conference calls, information revelation, forecast accuracy, incentives

JEL Classification: G24, G29, M41