Analyst reputation and management earnings forecasts |
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| Authors: | Jae B Kim Yongtae Kim Joonho Lee |
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| Institution: | 1. Lehigh University, USA;2. Santa Clara University, USA;3. Korea Advanced Institute of Science and Technology (KAIST), South Korea;4. California State Polytechnic University, Pomona, USA;1. University of Colorado Denver, 1475 Lawrence Street, Denver, CO 80202, USA;2. Bentley University, 175 Forest Street, Waltham, MA 02452, USA;3. Northeastern University, 404 Hayden Hall, 360 Huntington Avenue, Boston, MA 02115, USA;1. School of Business, University of Connecticut, 2100 Hillside Rd., Unit 1041A, Storrs, CT 06269, United States;2. College of Business, Colorado State University, 501 W. Laurel St., Fort Collins, CO 80523, United States;1. Department of Accounting, Box 8113, North Carolina State University, Raleigh, NC 27695-8113, United States;2. Department of Management, Ca’ Foscari University, Cannaregio 873, 30121 Venice, Italy;1. Western Michigan University, United States;2. George Mason University, United States;3. Florida Atlantic University, United States;1. Texas Christian University, United States;2. University of California at Riverside, United States;3. City University of Hong Kong, Hong Kong;4. West Virginia University, United States |
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| Abstract: | Prior studies show that analysts with high reputation are influential in the market. This paper examines whether managers consider analyst reputation in shaping their voluntary disclosure strategy. Using Institutional Investor magazine’s All-American (AA) rankings as a proxy for analyst reputation, we find that the coverage of AA analysts is positively associated with the likelihood of quarterly management earnings forecasts (MEFs). We also find that AA analysts’ forecast optimism is more positively associated with the likelihood of MEFs than non-AA analysts’ forecast optimism when the firm is covered by AA analysts. Analyses based on AA analyst coverage changes and AA status changes confirm the relation between analyst reputation and MEFs. We further find that analyst reputation influences other MEF properties, such as forecast news, bias, and revisions, and that our results are robust to alternative measures of analyst reputation. Further analyses show that market reactions at quarterly earnings announcements are more positive (negative) when firms meet/beat (miss) AA analysts’ forecasts than when firms meet/beat (miss) non-AA analysts’ forecasts. Collectively, our findings suggest that managers strategically provide voluntary forecasts by taking into account the reputation of individual analysts following their firms. |
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| Keywords: | Management earnings forecast Voluntary disclosure Analyst reputation Analyst forecast D80 G17 G30 M41 |
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