Accruals quality and analyst coverage

Lobo, Gerald J.; Song, Minsup; Stanford, Mary Harris

doi:10.1016/j.jbankfin.2011.08.006

Cited by 89 publications

(67 citation statements)

References 43 publications

(81 reference statements)

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“…Ball and Brown, 1968). The number of analysts is positively correlated with SIZE and GROWTH consistent with Bhushan (1989) and Lobo et al (2012). LEVERA GE also has a positive correlation with the number of analyst.…”

Section: Sample and Datasupporting

confidence: 52%

Do Financial Analysts Facilitate Investors’ Assessment Of Earnings?: Evidence From The Korean Stock Market

Jung

Lee

Choi

2016

JABR

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This paper seeks to enhance our understanding of financial analysts in assisting market investors' use of accounting earnings in the Korean stock market. We examine whether stock returns differentially reflect earnings information for firms with analyst coverage. We propose that the role of analysts as external monitors as well as information intermediaries enhances the market investors' valuation of earnings. We find that market valuation of earnings is higher for firms with analyst following. Furthermore, market investors' valuation of earnings increases ( or decreases) with the number of analysts (or with the dispersion of analysts' forecasts). This suggests that the beneficial effect of analysts arises through the quantity and quality of analyst s' information. This study contributes to the literature by investigating the important role of analysts in emerging market.

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Section: Sample and Datasupporting

confidence: 52%

Do Financial Analysts Facilitate Investors’ Assessment Of Earnings?: Evidence From The Korean Stock Market

Jung

Lee

Choi

2016

JABR

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“…It shows that the more difficult it is to understand corporate disclosure, the greater the demand for analysts' services is. Lobo et al(2012) discovered that the lower the quality of a firm's accruals are, the more analysts are likely to show an interest in the firm, and the more they incorporate private information into their earnings forecasts. They interpret these results to mean that lower accruals quality causes serious information asymmetry, and that this triggers a greater use of analysts' services.…”

Section: A Backgroundmentioning

confidence: 99%

The effect of financial statement comparability on analysts’ reliance on common information

Shim¹,

Ki²

2017

Glob Bus Financ Rev

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This study investigates whether financial statement comparability affects analysts' reliance on common information. Prior research reported that analysts' earnings forecasts for firms with higher financial statement comparability were more accurate. We extend prior research by investigating whether analysts increase their reliance on common information when financial statement comparability is high. In addition, we examine whether analysts' increased reliance on common information could lead to more accurate forecasts for firms with higher comparability. The main findings of this study are as follows. First, the higher the financial statement comparability is, the greater the extent to which analysts use private information. High financial statement comparability prevents analysts from differentiating themselves from other analysts simply by interpreting the given common information. Thus, these analysts are incentivized to acquire additional private information. Second, as analysts' reliance on private information increases, the positive association between financial statement comparability and analysts' forecast accuracy weakens. This suggests that the use of common information could be effective in increasing analysts' forecast accuracy for firms with higher comparability. Overall, this study shows that analysts use private information in order to differentiate themselves when financial statement comparability is high. However, the use of private information could increase noise, and deteriorates analysts' forecast accuracy.

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“…The findings of this study are mostly consistent with the information hypothesis and have the least consistency with the assumption of effective conservative agreement. Lobo et al (2012) examined the accrual quality and analysts following. They evidences showed that the analysts following increases when the accruals quality decreases.…”

Section: Theoretical Bases and Frameworkmentioning

confidence: 99%