Two essays on analyst revision information issued following management disclosures

Abstract

This thesis examines the relationship between the firm characteristics and the analyst reactions to management disclosures, and investor reactions to these analyst revisions issued after the management disclosures. The first essay examines the effect of firm characteristics on the reactions of analysts to management disclosures. Prior studies have overlooked that analysts can react differently because of firm characteristics that can affect to management forecasts’ credibility and usefulness, as well as specific situation like SEO or management forecast characteristics itself. In this study, I extend this line of research by considering firm characteristics, after controlling management forecast characteristics that can affect to the reactions of analysts. I provide evidence that for good news disclosures, analysts react more to the disclosures from the firms that have greater level of conservatism. On the other hand, for bad news disclosures, analysts react less to the disclosures from the firms that have higher level of conservatism. I also find that analysts react stronger to management disclosures announced by firms with strong governance and lower managerial ownership. These results show that firm characteristics are also the factors that analysts consider when they revise their earnings forecasts after the management disclosure. The second essay investigates how investors use the analyst forecast revision information issued after management disclosures. I extend prior literature by examining the relation between the contents of analyst forecast revisions and those of management disclosures. I provide evidence that investor reactions are stronger to the analyst revisions that are consistent with the prior management disclosures. I also find that the amount of new information is greater in the analyst revisions when they are inconsistent with management disclosures, suggesting that the inconsistency of analyst information is mainly driven by the new inform...