Reporting Bias and Analyst Forecast
Prof. Nanqin LIU
Assistant Professor, SUSTech Business School
Date: 16 May 2024 (Friday)
Time: 10:30 am – 12:00 pm
Venue: E22-G015
Host: Prof. Duncan LIU, Assistant Professor in Accounting
Abstract
This paper investigates how managers’ and analysts’ shared and conflicting incentives interact to affect firms’ financial reports and analysts’ forecasts, these reports’ association with market prices, and their information content. In our model, the analyst strives to forecast accurately while generating trading profits for their client; the manager aims to meet the analyst’s forecast while seeking favorable stock price responses to their financial reports. We show that the manager’s incentive to meet the analyst’s forecast, when combined with the analyst’s incentive to forecast accurately, leads to greater forecast accuracy and a greater response coefficient to the firm’s report in price despite the report having lower information content. Higher quality information possessed by the analyst can result in lower forecast accuracy and less total information being conveyed to the market by the forecast and the financial report.
Speaker
Prof. Nanqin LIU is currently an Assistant Professor at the Southern University of Science and Technology. Her research interests include auditing, financial reporting quality, and the interface between accounting and operations management. She utilizes analytical models to study the impact of regulations on audit quality and investors’ total mix of information. She has published papers in leading journals such as The Accounting Review.
All are welcome!
