The impact of trading commission incentives on analysts' stock coverage decisions and earnings forecast
Article Abstract:
A study examined the impact of trading commission incentives on the information production of security analysts. Unlike earlier investigations, which tended to focus on the effect of incentives to pursue good relations with managers on the reporting decisions of analysts, this research looks at the effect of incentives to create trading commissions influence the decisions of analysts in information gathering. This study models the interaction between an analyst and an investor with an initial endowment of a risky asset who has to pay a commission to a broker firm to buy or sell asset shares. The broker-employed analyst presents information which the investor uses in decisionmaking. The analyst's expectations of the commissions that can be derived from the information dictates how much information the analyst will collect. The incentives to gather information are most intense for stocks that are anticipated to give strong performance.
Publication Name: Journal of Accounting Research
Subject: Business
ISSN: 0021-8456
Year: 1998
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An experimental examination of the effects of forecast bias on individuals' use of forecasted information
Article Abstract:
The magnitude of forecast bias has an impact on individuals' willingness to acquire forecasts and their ability to use such forecasted information. This was gleaned from an examination of how the presence of forecast bias affects individual behavior. Two sets of experiments were undertaken under three different conditions, namely, forecasts are unbiased, forecasts contain low, systematic upward bias and forecasts contain high, systematic upward bias. Results of both experiments indicate willingness to acquire forecasts as long as the information has little or no bias. They learn to use this information which allows them to realize greater profit. On the other hand, they are less willing to continue acquiring highly biased forecasts, probably owing to their perception that such information is not useful.
Publication Name: Journal of Accounting Research
Subject: Business
ISSN: 0021-8456
Year: 1997
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The information content of earnings, revenues, and expenses
Article Abstract:
The incremental effect of the information content of revenue and expenses on earnings is examined using Value Line analysts' forecasts of earnings as market expectation proxies. Risk-adjusted returns at earnings announcements are positively-related to unexpected expenses and unexpected revenues. The information content of a combination of revenue and expense elements is greater than that of earnings. Revenues were also found to have information content in addition to earnings.
Publication Name: Journal of Accounting Research
Subject: Business
ISSN: 0021-8456
Year: 1991
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