Working Paper: CEPR ID: DP14678
Authors: Yencheng Chang; Alexander Ljungqvist; Kevin Tseng
Abstract: We show that U.S. analysts alter their forecasting behavior in response to a randomly assigned shock that exogenously varies the timeliness and cost of accessing companies’ mandatory disclosures in the cross-section of investors: analysts reduce the number of stocks they cover, issue less optimistic and more accurate forecasts that are less bold, and collectively reduce forecast dispersion. Our investigation of possible channels favors the explanation that analysts reduce the strategic component of their behavior: the changes are more pronounced among analysts with stronger incentives to strategically skew their forecasts, such as affiliated analysts and those catering to retail investors. We conclude that mandatory disclosure is a substitute for information production by analysts, whose behavior is constrained by investors’ ability to verify their forecasts using corporate filings.
Keywords: No keywords provided
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| EDGAR system implementation (G14) | analyst behavior (G41) |
| EDGAR system implementation (G14) | number of stocks covered by analysts (G24) |
| EDGAR system implementation (G14) | forecast optimism (E66) |
| EDGAR system implementation (G14) | forecast inaccuracy (C53) |
| EDGAR system implementation (G14) | informativeness of analyst forecasts (G17) |
| EDGAR system implementation (G14) | forecast dispersion and boldness (C46) |
| EDGAR system implementation (G14) | changes in analyst behavior (G41) |