We posit and find an effect of disclosure and analyst reporting regulations implemented from 2000 through 2003 (including Regulation Fair Disclosure, the Sarbanes-Oxley Act, and the Global Settlement Act) on the importance of analyst and forecast characteristics for analyst forecast accuracy. Following the enactment of these regulations, more experienced analysts and All-Star analysts do not maintain their superior forecast accuracy, and analysts employed by large brokerage houses perform worse than other analysts. In addition, we find a decrease in the importance of analyst effort, the number of industries and firms followed, days elapsed since the last forecast, and forecast horizon. While the importance of bold upward forecast revisions does not change, bold downward revisions lose their relevance for forecast accuracy after 2003. Finally, we find an increase in the important of prior forecast accuracy. We find that the importance of these characteristics varies with the precision of publicly available information. Specifically, the decrease in the importance of most analyst and forecast characteristics and the increase in the importance of prior forecast accuracy are greater when the precision of publicly available information is low. Overall, our results suggest that the positive effects of experience, effort, brokerage house size, and All-Star status on forecast accuracy in the pre-regulation period were because of the information advantages that these analysts enjoyed (rather than their ability to generate private information). In contrast, our results suggest that prior forecast accuracy is related to analysts' ability to generate private information.

Prior research has shown improvements in analysts' forecast accuracy around various events (e.g. new disclosure regulations or cross-listings), but these studies do not consider a change in the composition and ability of analysts providing forecasts over time. By studying foreign firms cross-listing on U.S. stock exchanges, we find that analyst composition changes by over 50 percent during the three-year period around cross-listing. We show that cross-listing is associated with a shift away from analysts who are less accurate forecasters and toward analysts who are more accurate forecasters. This shift in analyst composition accounts for a significant improvement of 9.5 percent in analyst forecast accuracy. In addition, we document that changes in both analyst ability and public information disclosure affect analyst forecast accuracy around cross-listing. Our results indicate that researchers should control for changes in analyst composition and ability when measuring the impact of specific events on analyst forecast accuracy.

Financial Analysts' Forecasts and Stock Recommendations reviews research related to the role of financial analysts in the allocation of resources in capital markets. The authors provide an organized look at the literature, with particular attention to important questions that remain open for further research. They focus research related to analysts' decision processes and the usefulness of their forecasts and stock recommendations. Some of the major surveys were published in the early 1990's and since then no less than 250 papers related to financial analysts have appeared in the nine major research journals that we used to launch our review of the literature. The research has evolved from descriptions of the statistical properties of analysts' forecasts to investigations of the incentives and decision processes that give rise to those properties. However, in spite of this broader focus, much of analysts' decision processes and the market's mechanism of drawing a useful consensus from the combination of individual analysts' decisions remain hidden in a black box. What do we know about the relevant valuation metrics and the mechanism by which analysts and investors translate forecasts into present equity values? What do we know about the heuristics relied upon by analysts and the market and the appropriateness of their use? Financial Analysts' Forecasts and Stock Recommendations examines these and other questions and concludes by highlighting area for future research.

This study provides new evidence about how tax footnote disclosure characteristics can alleviate errors in analyst forecasts of a firm's effective tax rate (ETR). Despite the importance of income taxes to a firm's bottom line, prior studies indicate that analysts and investors do not fully grasp the complexities of income taxes. Additionally, the FASB is interested in improving the effectiveness of financial statement footnotes and is evaluating the income tax footnote as part of the Disclosure Framework Project. I find that disclosures containing more quantitative information, less jargon, fewer complex words, and/or less legal terminology alleviate analysts' ETR forecast errors related to complexity in income tax accounting. Collectively, my findings provide evidence regarding the areas of accounting for income taxes that make forecasting ETRs difficult and the disclosure characteristics that aid analysts' understanding of tax information and thereby improve their ETR forecasts.

Financial analysts provide information in their research reports and thereby help forming expectations of a firm’s future business performance. Thus, it is essential to recognize analysts who provide the most precise forecasts and the accounting literature identifies characteristics that help finding the most accurate analysts. Tanja Klettke detects new relationships and identifies two new determinants of earnings forecast accuracy. These new determinants are an analyst’s “general forecast effort” and the “number of supplementary forecasts”. Within two comprehensive empirical investigations she proves these measures’ power to explain accuracy differences. Tanja Klettke’s research helps investors and researchers to identify more accurate earnings forecasts.

This study examines the effect of Regulation Fair Disclosure (FD) on the relevance of company-sponsored conference calls. Measuring relevance by a conference call's ability to improve analyst forecast accuracy and consensus, I find larger improvements in both variables during the period surrounding conference calls in the post-FD era versus the pre-FD era. These findings imply that in the post-FD era relatively more about a firm's upcoming earnings becomes known during conference calls, consistent with FD's success in eliminating selective disclosure.