Analyst earnings forecast revision activity around profit warnings across four European countries

Analyst earnings forecast revision activity around profit warnings across four European countries Purpose – The purpose of this paper is to report on research concerning financial analysts’ activity surrounding profit warnings issued by listed companies in the four largest European stock exchanges (France, Germany, the Netherlands and the UK). The authors address three aspects of analysts’ forecasts: ex-post accuracy of forecasts, earnings forecast revisions, and consensus forecast dispersion. The goal of the analysis is to study the differences between financial analysts’ behavior within different regulatory settings, namely common law vs civil law countries. Design/methodology/approach – The sample is composed of 1,330 profit warnings issued by listed European firms during the period 2000-2010. The authors apply event study methodology and OLS regressions to highlight the impact of the legal information environment on analysts’ reactions. Findings – The empirical analysis reveals that analyst activity depends on each country’s legal context factors, such as the legal information environment of the firm and the index of investor protection. Accordingly, the authors show that both a richer legal information environment and stronger country-level investor protection substantially improve analyst accuracy around profit warnings. Research limitations/implications – The sample is only composed on firms from four European countries owing to a lack of firms from other European countries that disclosed PW during the period 2000-2010. It would be pertinent to conduct future research dealing with an international sample from different continents. Practical implications – The paper contributes to a deeper understanding of analysts’ reactions to profit warnings. The findings can influence firms’ reporting practices and lead to future regulation policies. Originality/value – This work is the first to examine the relationship between profit warning releases and the behavior of financial analysts in a pan-European context where there are different institutional levels of investor protection. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Applied Accounting Research Emerald Publishing

Analyst earnings forecast revision activity around profit warnings across four European countries

Loading next page...
 
/lp/emerald-publishing/analyst-earnings-forecast-revision-activity-around-profit-warnings-avE40O6GFD
Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
0967-5426
DOI
10.1108/JAAR-01-2013-0005
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to report on research concerning financial analysts’ activity surrounding profit warnings issued by listed companies in the four largest European stock exchanges (France, Germany, the Netherlands and the UK). The authors address three aspects of analysts’ forecasts: ex-post accuracy of forecasts, earnings forecast revisions, and consensus forecast dispersion. The goal of the analysis is to study the differences between financial analysts’ behavior within different regulatory settings, namely common law vs civil law countries. Design/methodology/approach – The sample is composed of 1,330 profit warnings issued by listed European firms during the period 2000-2010. The authors apply event study methodology and OLS regressions to highlight the impact of the legal information environment on analysts’ reactions. Findings – The empirical analysis reveals that analyst activity depends on each country’s legal context factors, such as the legal information environment of the firm and the index of investor protection. Accordingly, the authors show that both a richer legal information environment and stronger country-level investor protection substantially improve analyst accuracy around profit warnings. Research limitations/implications – The sample is only composed on firms from four European countries owing to a lack of firms from other European countries that disclosed PW during the period 2000-2010. It would be pertinent to conduct future research dealing with an international sample from different continents. Practical implications – The paper contributes to a deeper understanding of analysts’ reactions to profit warnings. The findings can influence firms’ reporting practices and lead to future regulation policies. Originality/value – This work is the first to examine the relationship between profit warning releases and the behavior of financial analysts in a pan-European context where there are different institutional levels of investor protection.

Journal

Journal of Applied Accounting ResearchEmerald Publishing

Published: May 11, 2015

There are no references for this article.

You’re reading a free preview. Subscribe to read the entire article.


DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Search

Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly

Organize

Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.

Access

Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

DeepDyve

Freelancer

DeepDyve

Pro

Price

FREE

$49/month
$360/year

Save searches from
Google Scholar,
PubMed

Create folders to
organize your research

Export folders, citations

Read DeepDyve articles

Abstract access only

Unlimited access to over
18 million full-text articles

Print

20 pages / month

PDF Discount

20% off