Regulators and the general public frequently advocate for higher-quality disclosure policies to reduce information asymmetry. Research and anecdotal evidence documents sizable benefits to firms that maintain high quality disclosure. This thesis explores the costs and benefits of changing disclosure quality from the perspective of the financial analysts, a sophisticated user group. This thesis presents a comprehensive view of analysts’ evaluations of disclosure quality. I investigate capital market reaction when firms experience a sustained decrease in analyst disclosure ratings. The results demonstrate that firms with deteriorating disclosure experience negative consequences, consistent with increasing information asymmetry. However, the magnitude is not as large as expected given the benefits enjoyed when disclosure quality improves. Given that firms that allow their disclosure quality to decline give up benefits they previously enjoy, I investigate why they allow this decline to occur. The deterioration is negatively associated with the interaction between capital demand and expected earnings performance implying that when firms require capital, but are expecting poor future earnings, they are more likely to permit a deterioration to occur. Declines are also associated with the occurrence of various disruptive events that imply greater uncertainty about the firm. These firms have a strong demand for external capital which they satisfy by accessing private and public debt markets. Overall, firms that experience disclosure ratings declines are not a mirror image of firms that experience ratings increases. Finally, I investigate the association between the disclosure ratings and quantitative disclosure characteristics. The results indicate significant associations, consistent with the assumption that easily accessible and quantifiable disclosure measures are captured in analysts’ ratings of disclosure quality. This thesis adds to the literature by providing insight into how analysts evaluate disclosure quality and what managers are willing and able to deliver. The research documents attributes of disclosure quality that are regarded as important by financial analysts. While analysts are a key set of financial statement users, there are many other types of users. By understanding disclosure quality from a user's perspective, regulators and researchers are more able to anticipate the implications of a proposed change in disclosure rules.

Regulators and the general public frequently advocate for higher-quality disclosure policies to reduce information asymmetry. Research and anecdotal evidence documents sizable benefits to firms that maintain high quality disclosure. This thesis explores the costs and benefits of changing disclosure quality from the perspective of the financial analysts, a sophisticated user group. This thesis presents a comprehensive view of analysts’ evaluations of disclosure quality. I investigate capital market reaction when firms experience a sustained decrease in analyst disclosure ratings. The results demonstrate that firms with deteriorating disclosure experience negative consequences, consistent with increasing information asymmetry. However, the magnitude is not as large as expected given the benefits enjoyed when disclosure quality improves. Given that firms that allow their disclosure quality to decline give up benefits they previously enjoy, I investigate why they allow this decline to occur. The deterioration is negatively associated with the interaction between capital demand and expected earnings performance implying that when firms require capital, but are expecting poor future earnings, they are more likely to permit a deterioration to occur. Declines are also associated with the occurrence of various disruptive events that imply greater uncertainty about the firm. These firms have a strong demand for external capital which they satisfy by accessing private and public debt markets. Overall, firms that experience disclosure ratings declines are not a mirror image of firms that experience ratings increases. Finally, I investigate the association between the disclosure ratings and quantitative disclosure characteristics. The results indicate significant associations, consistent with the assumption that easily accessible and quantifiable disclosure measures are captured in analysts’ ratings of disclosure quality. This thesis adds to the literature by providing insight into how analysts evaluate disclosure quality and what managers are willing and able to deliver. The research documents attributes of disclosure quality that are regarded as important by financial analysts. While analysts are a key set of financial statement users, there are many other types of users. By understanding disclosure quality from a user's perspective, regulators and researchers are more able to anticipate the implications of a proposed change in disclosure rules.

Cette thèse est composée de trois chapitres présentant le rôle et pouvoir de surveillance des analystes financiers sous trois perspectives différentes. Le premier chapitre est consacré au pouvoir de surveillance des analystes financiers sur le reporting financier. Plus précisément, j’étudie le contenu informatif et le pouvoir de surveillance des commentaires écrits par les analystes financiers sur la qualité des résultats comptables. Je mets en évidence que ces commentaires ont un effet marginal prédictif en ce qui concerne les retraitements comptables futurs et a un contenu informatif pour les investisseurs qui va au-delà des prévisions de résultat, de l’estimation du prix des actions, du cours cible, et des autres informations qualitatives contenues dans les rapports des analystes financiers. Les analyses complémentaires suggèrent que les réactions de marché suite à ces commentaires sont principalement induites par les commentaires négatifs et ceux traduisant un caractère certain. Par ailleurs, je trouve que les entreprises réduisent considérablement le niveau de leurs accruals discrétionnaires suite à la publication de commentaires négatifs, cette réduction n’est pas associée à une hausse de la manipulation des résultats financiers résultant d’actions réelles. Le deuxième s’intéresse aux questions suivantes : Est-ce que les analystes financiers ont un pouvoir de surveillance sur le reporting financier permettant de résoudre les problèmes d’agence liés à l’augmentation non justifiée des rémunérations des cadres dirigeants résultant de manipulations comptables. Je mets en avant que le pouvoir de surveillance des analystes financiers réduit les possibilités pour les cadres dirigeants de dissimuler aux administrateurs les manipulations comptables réalisées, permettant ainsi aux administrateurs d’ajuster plus facilement les rémunérations des cadres dirigeants le cas échéant. En accord avec cet argument, je trouve que les résultats comptables publiés sont moins prépondérants dans la détermination de la rémunération du PDG d’entreprises critiquées par les analystes financiers pour la faible qualité de leurs résultats comptables, mais seulement lorsque les administrateurs sont susceptibles d’être au courant de l’existence de rapports critiques. Les principaux résultats sont robustes lorsque les firmes sont appariées par performance et en contrôlant pour les effets fixes entreprises. Ces résultats ne sont pas induits par d’autres éléments textuels contenus dans les rapports d’analystes financiers. Des analyses complémentaires suggèrent que l’importance accordée aux résultats comptables diminue lorsque le montant des accruals s’écarte de la prévision des analystes. Le troisième s’intéresse aux effets des réformes réglementaires visant à accroître l’indépendance des analystes financiers sur le pouvoir de surveillance des analystes sur le reporting financier. La règle NASD 2711 exige des entreprises de courtage une séparation au niveau de leur structure entre leurs activités de banque d’investissement et celles de recherche sur les titres; dans le même temps, le Global Settlement demande aux banques participantes de financer les entreprises de recherche indépendantes à hauteur de 432,5 millions de dollars sur la période 2004 – 2009. Les résultats suggèrent une augmentation de l’efficience du pouvoir de surveillance des analystes financiers suite à l’introduction de ces réformes. Les analyses complémentaires mettent en avant que cette hausse est principalement induite par le Global Settlement. La robustesse des résultats est testée par l’utilisation de la méthode difference-in-difference utilisant des entreprises canadiennes comme groupe de contrôle. De plus, je mets en évidence un revirement de situation en ce qui concerne l’efficience du pouvoir de surveillance des analystes financiers suite à l’achèvement de la période de financement obligatoire de cinq années requise par le Global Settlement. / This dissertation consists of three chapters that present three standalone essays on the monitoring role of financial analysts. Chapter 1 investigates the monitoring role of financial analysts in the financial reporting process by examining the informativeness and monitoring effect of their written comments on earnings quality. I find that these comments have incremental predictability with respect to future accounting restatements, and convey information to investors beyond that in the earnings forecasts, stock ratings, price targets, and other qualitative text in analyst reports. Further analyses suggest that the market’s reaction to these comments is primarily driven by negative comments and comments written with certainty. In addition, controlling for accrual reversals, I find that firms significantly reduce the level of accruals-based earnings management after receiving negative comments, and this reduction is not accompanied by an increase in real activities management. Overall, the first chapter provides direct evidence on analysts’ monitoring role in financial reporting. Chapter 2 examines whether and how analysts’ monitoring of the financial reporting process alleviates a well-known agency problem in which a manager inflates her compensation by manipulating earnings. I argue that analysts’ monitoring reduces a manager’s ability to conceal earnings management from directors, thus facilitating directors’ adjustment of executive compensation in the presence of earnings management. Consistent with this argument, I find that earnings carry a lower weight in the determination of CEO compensation in firms that are criticized by analysts regarding earnings quality, but only when directors are likely to be aware of the critical analyst reports. The main findings are robust to matching on performance and controlling for firm-fixed effects and are not driven by other text in the analyst reports. Additional analyses suggest that the weight placed on earnings decreases as the actual accruals deviate from analysts’ accruals forecasts. Overall, the second chapter emphasizes analysts’ monitoring role in alleviating managerial rent extraction in executive compensation. Chapter 3 provides evidence on the impact of recent analyst independence reforms (the National Association of Securities Dealers [NASD] Rule 2711 and the companion New York Stock Exchange [NYSE] Rule 472 Amendment, and the Global Settlement) on analysts’ monitoring role in the financial reporting process. The NASD Rule 2711 requires brokerage firms to structurally separate investment banking from equity research; meanwhile, the Global Settlement mandates the participating banks to fund independent research firms to the amount of $432.5 million from 2004 to 2009. I find evidence consistent with an increase in analysts’ monitoring effectiveness following the reforms. Further analyses suggest that this increase is primarily driven by the Global Settlement, rather than by the adoption of NASD Rule 2711. The evidence is robust to a difference-in-difference specification with Canadian firms as the control group. Moreover, I document a reversal of the increase in monitoring effectiveness following the end of the Global Settlement’s five-year funding. Overall, the third chapter highlights the interaction between the monitoring role of financial analysts and the regulatory environment.

Regulators and the general public frequently advocate for higher-quality disclosure policies to reduce information asymmetry. Research and anecdotal evidence documents sizable benefits to firms that maintain high quality disclosure. This thesis explores the costs and benefits of changing disclosure quality from the perspective of the financial analysts, a sophisticated user group. This thesis presents a comprehensive view of analysts’ evaluations of disclosure quality. I investigate capital market reaction when firms experience a sustained decrease in analyst disclosure ratings. The results demonstrate that firms with deteriorating disclosure experience negative consequences, consistent with increasing information asymmetry. However, the magnitude is not as large as expected given the benefits enjoyed when disclosure quality improves. Given that firms that allow their disclosure quality to decline give up benefits they previously enjoy, I investigate why they allow this decline to occur. The deterioration is negatively associated with the interaction between capital demand and expected earnings performance implying that when firms require capital, but are expecting poor future earnings, they are more likely to permit a deterioration to occur. Declines are also associated with the occurrence of various disruptive events that imply greater uncertainty about the firm. These firms have a strong demand for external capital which they satisfy by accessing private and public debt markets. Overall, firms that experience disclosure ratings declines are not a mirror image of firms that experience ratings increases. Finally, I investigate the association between the disclosure ratings and quantitative disclosure characteristics. The results indicate significant associations, consistent with the assumption that easily accessible and quantifiable disclosure measures are captured in analysts’ ratings of disclosure quality. This thesis adds to the literature by providing insight into how analysts evaluate disclosure quality and what managers are willing and able to deliver. The research documents attributes of disclosure quality that are regarded as important by financial analysts. While analysts are a key set of financial statement users, there are many other types of users. By understanding disclosure quality from a user's perspective, regulators and researchers are more able to anticipate the implications of a proposed change in disclosure rules. / Business, Sauder School of / Graduate

abstract: When managers provide earnings guidance, analysts normally respond within a short time frame with their own earnings forecasts. Within this setting, I investigate whether financial analysts use publicly available information to adjust for predictable error in management guidance and, if so, the explanation for such inefficiency. I provide evidence that analysts do not fully adjust for predictable guidance error when revising forecasts. The analyst inefficiency is attributed to analysts' attempts to advance relationship with the managers, analysts' compensation not tie to forecast accuracy, and their forecasting ability. Finally, the stock market acts as if it does not fully realize that analysts respond inefficiently to the guidance, introducing mispricing. This mispricing is not fully corrected upon earnings announcement. / Dissertation/Thesis / Ph.D. Accountancy 2012

Thesis advisor: Mark Bradshaw / Managers prioritize questions from favorable analysts during earnings announcement conference calls, reinforcing analysts’ incentives to be optimistic. However, managers also interact with unfavorable analysts on calls, and, when they do, absolute announcement returns are larger. I seek to understand why managers interact with unfavorable analysts. I find that unfavorable analysts attenuate their negative views after these interactions with managers. Additionally, the stock price response is stronger for forecasts from managers who regularly interact with unfavorable analysts, consistent with enhanced credibility of these managers. Finally, I use peer firm restatement announcements as exogenous shocks to investors’ assessment of a firm’s accounting quality, and I find that nonrestating firms with managers who regularly interact with unfavorable analysts experience attenuated negative returns, relative to other nonrestating peers. Overall my findings are consistent with managers’ interactions with unfavorable analysts providing significant benefits to the firm, such as resolving analysts’ concerns and increasing managers’ credibility. / Thesis (PhD) — Boston College, 2023. / Submitted to: Boston College. Carroll School of Management. / Discipline: Accounting.

This study will furnish the reader with general and specific investment advice as taken from questionnaires sent to a group of men who specialize in giving investment and financial advice -- financial analysts.

I modern tid, andra världskriget och framåt, har finansanalytikerns roll vuxit markant och dess inverkan på börsen diskuteras numera flitigt. Forskning har bedrivits flitigt utomlands om hur dem arbetar inom yrket men materialet I Sverige är dessvärre väldigt tunt. Det finns en studie från 1992 av Lars Olbert där han kartlägger svenska finansanalytikers informationsanvändning och vilka värderingsmodeller som används i praktiken och inte bara i teorin. Denna kartläggning skulle vara intressant, och releveant, att uppdatera. Därav denna studie. Syftet med denna studie är att undersöka vilken information och värderingsmodeller som svenska finansanalytiker använder vid företagsvärdering 2011 samt att kartlägga om det finns skillnader i informationsanvändning mellan 1992 och 2011. Studien utgår ifrån en kvantitativ metod där empirin samlades in genom en webenkät. En pilot-intervju samt en pilot-enkät genomfördes innan den slutgilta enkäten skickades ut. Hypoteserna grundade sig i förändringar mot Olbert där även intressanta teoretiska samband testades av dessa förändringar. Studiens resultat visar att det skett förändringar i användandet av information och värderingsmodeller men vi finner även att visa modeller och viss information är oförändrad. Precis som tidigare är fundamental analys den vanligaste metod även 2011. Inom teknisk analys ser vi mindre förändringar medan i beta analysen ser vi en större förändring. Den enskilt största förändringen är en ökad användning av kassaflödesanalyser. P/E-talsvärdering däremot används marginellt mer idag än 1992. / In modern times, the Second World War and onwards, the role of the financial analysts has grown significantly and it’s influence and impact on the stock exchange is now widely discussed. Research has been conducted extensively abroad in their profession and how they work but the material in Sweden is very thin. There is a study by Lars Olbert from 1992 in hich he indentifies information use and the valuation models used in practice by swedish analysts and not just in theory. This study would be interesting, and relevant, to update. Hence this study. The purpose of the study is to examine the information and valuation models that Swedish financial analysts use 2011 and to identify whether there are differences in information usage between 1992 and 2011. The study is based on a quantitative method where empirical data were gathered through a web-based survey. An interview and a test-survey was issued before the actual survey was sent out. The hypothesis’ were based on the changes from Olbert and also interesting theoretical relationships were tested. Our results demonstrate that there are changes in the usage of information and valuation models, but we also find that the usage of some models and information is unchanged. As before, the fundamental analysis, is the most common valuation method in 2011. In technical analysis, we find minor changes while in beta analysis, we find a major change. The single biggest change is the increased use of cash flow. P/E-valuation is also used more today than in 1992.

The objective of this dissertation is to provide insights on key actors who affect the link between marketing and firm value. The first essay examines financial analysts who provide earnings estimates about firms, thereby connecting firm and the stock market. The author uncovers whether and how financial analysts link market-based assets (e.g., brand equity) to a firm's cash flows, drivers of firm value. The author predicts market-based assets affect a firm's cash flow level, volatility, and acceleration through two marketing strategies, the ability to charge price premiums and penetrate new product markets. Hypotheses are tested using data from surveys of 220 North America based financial analysts. Based on analysts' feedback, brand and channel equity affect a firm's ability to penetrate new product markets, and brand equity also affects a firm's ability to charge price premiums. The ability to charge price premiums increases cash flows level while the ability to penetrate new product markets enhances cash flow level and acceleration of cash flows. Finally, channel equity directly lowers cash flow volatility and market intelligence enhances cash flow level. The findings offer evidence that analysts connect a firm's market-based assets to the generation of its cash flows. This has important implications for managers who maintain communications with the financial analyst community. In the second essay, the author examines the impact of a firm's shareholders and board of directors on the marketing-firm value link. The author hypothesizes that a firm's shareholders and board of directors affect how its advertising and R&D dollars are spent and also affect stock market participants' perceptions of this spending, thereby affecting its firm value. Hypotheses are tested using data on 575 publicly listed firms in the United States. The findings indicate that higher shareholder governance and higher marketing spending (both advertising and R&D spending) increase firm value. However, somewhat interestingly, higher board governance and higher advertising spending decrease firm value. These results highlight the importance of considering corporate governance when analyzing the marketing-shareholder value link and offer yet another important reason for the marketing function to have a voice in the firm's boardroom. / text

High quality financial reporting is critically important for bank regulation, particularly market discipline, but limited evidence exists on why banks provide different levels of financial reporting quality. I examine whether institutional investors and financial analysts impact bank financial reporting quality. Although I find no impact of analysts on bank financial reporting quality, institutional ownership is positively associated with financial reporting quality, and this relation is strongest for banks with high information asymmetry and for “monitoring” institutional investors. Institutional investors also sell shares following the announcement of a restatement, suggesting they are willing to use the threat of exit as a mechanism to influence bank managers and demand financial reporting quality. Finally, I find institutional investors demand financial reporting quality primarily for high risk banks and also reduce ex-ante bank risk and ex-post non-performing loans. Collectively, these results suggest institutional investors are an important component of bank governance. / text