The effect of financial statement comparability on analysts’ reliance on common information
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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.
Abstract
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.
참고문헌 (24)
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