Do Firms’ Nonfinancial Disclosures Enhance the Value of Analyst Services?*

44 Pages Posted: 29 Aug 2009

See all articles by Craig Nichols

Craig Nichols

Syracuse University

Matthew M. Wieland

Miami University of Ohio - Department of Accountancy

Date Written: August 27, 2009

Abstract

Regulation FD recommends press releases as a primary avenue for timely disclosure of material information to market participants. Firms commonly issue product-related and business expansion information through press releases, yet no study examines how analysts respond to these information events. We find that forecasting activity nearly doubles at the disclosure date, and that forecasts associated with these disclosures become more accurate and less dispersed across analysts. Finally, in short windows around the disclosure date, the market’s reaction is concentrated at the date of the subsequent forecast revision. Overall, our results suggest that nonfinancial disclosures improve the quality and quantity of information in capital markets and appear to enhance the value of analysts’ services, even though the information is made widely available to all market participants at the time the firm makes the disclosure.

Keywords: Security analysts, Forecast error, Forecast dispersion, Disclosure, Information environment, Reg FD

JEL Classification: M41, G12, G29

Suggested Citation

Nichols, Craig and Wieland, Matthew M., Do Firms’ Nonfinancial Disclosures Enhance the Value of Analyst Services?* (August 27, 2009). Available at SSRN: https://ssrn.com/abstract=1463005 or http://dx.doi.org/10.2139/ssrn.1463005

Craig Nichols (Contact Author)

Syracuse University ( email )

900 S. Crouse Avenue
Syracuse, NY 13244-2130
United States

Matthew M. Wieland

Miami University of Ohio - Department of Accountancy ( email )

310 Laws Hall
Oxford, OH 45056-1675
United States

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