Corporate disclosures play an important role in the capital market in passing on information to the relevant parties outside companies. Corporate information is useful because it can be used to assess businesses, update subjective estimations, and make effective decisions on the investment of resources. Analysts are considered major users of corporate information. Analysts are important in the sense that they are intermediaries who receive and process financial information for investors. The major tasks of analysts are to collect company information from various sources, analyse company performance, make earnings forecasts, and arrive at buy/hold/sell recommendations. As analysts intensely use financial information in their decision-making processes to reach decisions, the nature of their work is influenced by the quality of the information they use. / This thesis aims to provide evidence of the usefulness and relevance of voluntary disclosures to analysts' recommendation revisions. The study examines whether there is a relationship between voluntary disclosures and analysts' recommendations by observing what characteristics of voluntary disclosures are associated with the nature of analysts' recommendation revisions and the extent of that association. / The focus of the research is on changes in analyst recommendations and the new information disclosures that a company has made public since the previous revision. Company voluntary disclosures are observed from selected sources including company announcements, news and press releases, and annual reports. Analyst recommendation revisions are collected from the I/B/E/S recommendation history database, and these revisions are matched with the presence of voluntary disclosures during the change period. The nature of recommendation revisions are observed via four different measures: direction of change, magnitude of change, type of new recommendation and level of rating. Three research instruments are required for measuring the characteristics of voluntary disclosures; (1) content analysis methods used with company announcements and news to evaluate aspects of the narrative in terms of topic, favourability, and price-sensitivity, (2) a disclosure index used to measure information quantity in annual reports, and (3) a readability index used to measure quality of presentation. The use of alternative measures of recommendation revision, together with measures of both the quantity and quality of voluntary disclosures leads to the formulation of a number of subsidiary hypotheses for testing in this study. / Based on a sample of over 200 recommendation revisions of 40 listed Australian companies, the results suggest that voluntary disclosures do help to explain the variations in analyst recommendation revisions. The results reveal that the quantity of disclosures and readability scores are positively associated with the number of recommendation revisions, and that disclosures with favourable signals or with price-sensitive contents are significantly related to the direction and type of analyst revisions. In addition, disclosure of specific themes (e.g., dividend and product) in company announcements and news are significantly associated with the recommendation change. Readability scores also exhibit a significant positive relationship with the direction of change, suggesting that there is a relationship between the readability level of company announcements and recommendation revisions. However, no significant evidence is found between disclosure scores and the properties of recommendation revisions. / The findings have implications for both the formulation of accounting policies and the regulation of financial disclosures: knowledge of the key themes of disclosures which are associated with recommendation revisions might induce companies to adapt their disclosure strategy; regulators might also wish to pay more attention to such disclosures and their ability to meet the decision making needs of users. / Thesis (PhDBusinessandManagement)--University of South Australia, 2004.
| Identifer | oai:union.ndltd.org:ADTP/267532 |
| Creators | Laohapolwatana, Worrawan Toogjit. |
| Source Sets | Australiasian Digital Theses Program |
| Language | English |
| Detected Language | English |
| Rights | copyright under review |
Page generated in 0.009 seconds