Brokerage Industry Self-Regulation: The Case of Analysts' Background Disclosures

53 Pages Posted: 15 Sep 2006 Last revised: 13 Jan 2016

Lawrence D. Brown

Temple University - Department of Accounting

Artur Hugon

Arizona State University (ASU)

Hai Lu

Singapore Management University; University of Toronto - Rotman School of Management

Date Written: November 10, 2009

Abstract

We evaluate an industry disclosure initiative designed to inform investors, the practice of providing information regarding investment professionals’ backgrounds. Implicit in the motivation for this initiative is the presumed relevance of background information to investors seeking investment professionals’ guidance. We find that analysts with disclosure incidents forecast less accurately than a matched sample of analysts without such disclosures, and that the market views disclosed analysts’ earnings forecasts as less credible than those of the matched sample. Our evidence is consistent with disclosures signaling a persistent analyst characteristic. We conclude that analyst backgrounds are informative regarding both the accuracy and credibility of their earnings forecasts, and that investors who are uninformed as to an analyst’s background can benefit from these disclosures.

Keywords: analysts, earnings forecasts, professionalism, self-regulation

JEL Classification: G24, G28, G14, M4

Suggested Citation

Brown, Lawrence D. and Hugon, Artur and Lu, Hai, Brokerage Industry Self-Regulation: The Case of Analysts' Background Disclosures (November 10, 2009). AAA 2007 Financial Accounting & Reporting Section (FARS) Meeting Paper ; Contemporary Accounting Research, Forthcoming. Available at SSRN: https://ssrn.com/abstract=930744

Lawrence D. Brown

Temple University - Department of Accounting ( email )

Philadelphia, PA 19122
United States

Artur Hugon (Contact Author)

Arizona State University (ASU) ( email )

Farmer Building 440G PO Box 872011
Tempe, AZ 85287
United States

Hai Lu

Singapore Management University ( email )

60 Stamford Road
Singapore 178900
Singapore

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6
Canada

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