Tagging the triggers: an empirical analysis of information events prompting sell-side analyst reports

In order to fulfill their function as information intermediaries in capital markets, sell-side equity analysts regularly issue updated forecasts on the stocks they cover. Quite often, the publication of (revised) analysts’ reports is subject to certain trigger events such as the publication of annual figures or the announcement of an upcoming merger. In this exploratory study, we develop a two-step procedure to identify the core events that trigger the release of analysts’ reports on companies that constitute the Dow Jones EuroSTOXX50 index during the three-year period from 2004 to 2006. These can be grouped into Financial Disclosures, Corporate Management, Corporate Strategy, Business Activity, Operating Environment and Share. The results suggest that sell-side analysts attach great importance to non-financial information events when transforming their earnings estimates into valuation forecasts and stock recommendations. Additionally, we link the information events identified as reasons of issuance to the summary measures disclosed in the reports in order to investigate the relationship between the report trigger and associated analyst reaction. Our findings indicate that the forecasting activity of sell-side analysts is greatly influenced by forward-looking statements made by management, strategy-related news flow, and non-company-specific information relating to the covered firm’s operating environment.