Using earnings conference calls to identify analysts with superior private information

Using earnings conference calls to identify analysts with superior private information We examine the extent to which analysts who participate in earnings conference calls by asking questions possess superior private information relative to analysts who do not ask questions. Using a large sample of earnings conference call transcripts over the period 2002–2005, we find that annual earnings forecasts issued immediately after a conference call are both more accurate and timelier for participating analysts relative to nonparticipating analysts. These results hold after controlling for observable analyst characteristics, suggesting conference call participation can serve as a mechanism to identify analysts possessing superior private information. The economic magnitude of the superior private information contained in participating analyst forecasts is small but comparable with magnitudes reported in prior studies with respect to other analyst characteristics. Our mediation analysis does not support the notion that the superior private information stems exclusively from the information received during the call. Therefore, from a regulatory stand point, our results suggest that regulatory intervention to allow for equal participation during conference calls may be unwarranted. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Accounting Studies Springer Journals

Using earnings conference calls to identify analysts with superior private information

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Publisher
Springer US
Copyright
Copyright © 2012 by Springer Science+Business Media, LLC
Subject
Economics / Management Science; Accounting/Auditing; Finance/Investment/Banking; Public Finance & Economics
ISSN
1380-6653
eISSN
1573-7136
D.O.I.
10.1007/s11142-012-9210-y
Publisher site
See Article on Publisher Site

Abstract

We examine the extent to which analysts who participate in earnings conference calls by asking questions possess superior private information relative to analysts who do not ask questions. Using a large sample of earnings conference call transcripts over the period 2002–2005, we find that annual earnings forecasts issued immediately after a conference call are both more accurate and timelier for participating analysts relative to nonparticipating analysts. These results hold after controlling for observable analyst characteristics, suggesting conference call participation can serve as a mechanism to identify analysts possessing superior private information. The economic magnitude of the superior private information contained in participating analyst forecasts is small but comparable with magnitudes reported in prior studies with respect to other analyst characteristics. Our mediation analysis does not support the notion that the superior private information stems exclusively from the information received during the call. Therefore, from a regulatory stand point, our results suggest that regulatory intervention to allow for equal participation during conference calls may be unwarranted.

Journal

Review of Accounting StudiesSpringer Journals

Published: Sep 25, 2012

References

  • Favorable versus unfavorable recommendations: The impact on analyst’ access to management-provided information
    Chen, S; Matsumoto, D
  • Do investors respond to analysts’ forecast revisions as if forecast accuracy is all that matters?
    Clement, M; Tse, S
  • Financial analyst characteristics and herding behavior in forecasting
    Clement, MB; Tse, S
  • Optimal release of information by firms
    Diamond, D
  • The behavior of maximum likelihood estimates under nonstandard conditions
    Huber, PJ
  • Estimating mediated effects in prevention studies
    Mackinnon, DP; Dwyer, JH
  • A simulation study of mediated effect measures
    Mackinnon, DP; Warsi, G; Dwyer, JH
  • Self-selection and analyst coverage
    McNichols, M.; O’Brien, P.

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