Quelle a été l'incidence de la réglementation en matière de communication èquitable de l'information sur les activités des analystes financiers ?

Translated title of the contribution: How has regulation FD affected the operations of financial analysts?

Partha S. Mohanram, Shyam Vallabha Josyula Sunder

Research output: Contribution to journalArticle

111 Citations (Scopus)

Abstract

In this paper, we analyze how financial analysts generate information, make decisions about firm coverage, and try to maintain their forecasting accuracy after the passage of Regulation Fair Disclosure ("Reg FD"). Using the model developed by Barron, Kim, Lim, and Stevens 1998, we find that analysts are investing more effort in idiosyncratic information discovery. In order to do this, individual analysts appear to be reducing coverage for well-followed firms while increasing coverage of firms that were less followed prior to Reg FD. Analysts who had preferential links with firms that they covered, such as analysts from large brokerage houses, tend to have greater forecast accuracy in the pre-FD period. However, these analysts are unable to sustain their forecasting superiority in the post-FD period, which suggests that there has been a leveling of the information playing field among analysts. Overall, our results reflect a trend toward greater reliance on idiosyncratic information discovery on part of the financial analysts.

Original languageFrench
Pages (from-to)491-525
Number of pages35
JournalContemporary Accounting Research
Volume23
Issue number2
DOIs
StatePublished - Jun 2006
Externally publishedYes

Fingerprint

Financial analysts
Analysts
Regulation FD
Investing
Regulation fair disclosure
Leveling
Forecast accuracy
Forecasting accuracy
Brokerage

Keywords

  • Analyst coverage
  • Forecast accuracy
  • Information precision
  • Regulation FD

ASJC Scopus subject areas

  • Finance
  • Accounting
  • Economics and Econometrics

Cite this

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title = "Quelle a {\'e}t{\'e} l'incidence de la r{\'e}glementation en mati{\`e}re de communication {\`e}quitable de l'information sur les activit{\'e}s des analystes financiers ?",
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N2 - In this paper, we analyze how financial analysts generate information, make decisions about firm coverage, and try to maintain their forecasting accuracy after the passage of Regulation Fair Disclosure ("Reg FD"). Using the model developed by Barron, Kim, Lim, and Stevens 1998, we find that analysts are investing more effort in idiosyncratic information discovery. In order to do this, individual analysts appear to be reducing coverage for well-followed firms while increasing coverage of firms that were less followed prior to Reg FD. Analysts who had preferential links with firms that they covered, such as analysts from large brokerage houses, tend to have greater forecast accuracy in the pre-FD period. However, these analysts are unable to sustain their forecasting superiority in the post-FD period, which suggests that there has been a leveling of the information playing field among analysts. Overall, our results reflect a trend toward greater reliance on idiosyncratic information discovery on part of the financial analysts.

AB - In this paper, we analyze how financial analysts generate information, make decisions about firm coverage, and try to maintain their forecasting accuracy after the passage of Regulation Fair Disclosure ("Reg FD"). Using the model developed by Barron, Kim, Lim, and Stevens 1998, we find that analysts are investing more effort in idiosyncratic information discovery. In order to do this, individual analysts appear to be reducing coverage for well-followed firms while increasing coverage of firms that were less followed prior to Reg FD. Analysts who had preferential links with firms that they covered, such as analysts from large brokerage houses, tend to have greater forecast accuracy in the pre-FD period. However, these analysts are unable to sustain their forecasting superiority in the post-FD period, which suggests that there has been a leveling of the information playing field among analysts. Overall, our results reflect a trend toward greater reliance on idiosyncratic information discovery on part of the financial analysts.

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