Have Analyst Forecast Properties Improved After Regulations?

dc.contributor.authorEspahbodi, Reza
dc.contributor.authorEspahbodi, Pouran
dc.contributor.authorEspahbodi, Hassanen_US
dc.dateOctober 2014en_US
dc.description.abstractViolation of securities laws and corporate scandals led to the passage of Regulation Fair Disclosure and the Sarbanes-Oxley Act, and to the Global Analyst Research Settlement, in early 2000. These regulations were designed to protect investors by reducing analyst conflicts of interest and improving the quality of financial information. As such, these regulations were expected to improve analysts' earnings forecast. This paper examines the trend in accuracy and dispersion of analysts' earnings forecasts over the period 1994-2009 to determine if forecast properties improved following these regulations. Consistent with the evidence provided by many of the earlier studies, we do find that forecast accuracy and dispersion improved during the period immediately after these regulations. This finding supports the notion (although it does not prove) that these regulations achieved their objectives in the short run. However, univariate and multivariate tests over the longer period show that analyst forecast accuracy declined and forecast dispersion significantly increased in subsequent years. The results are robust to alternative measures of our dependent variables, specifications of pre- and post-regulation periods, and sample composition; and imply that these regulations did not collectively improve the information environment despite the reduction in analyst conflicts of interest. The continued problem with the information environment, therefore, seems to be largely due to the quality of financial reports. Also, the difference between short- and long-term results suggest that regulators need to weigh the cost of regulations against both their short- and long-term benefits.en_US
dc.description.sponsorshipKaw Valley Banken_US
dc.identifier.otherSchool of Business Working Paper Series; No. 163en_US
dc.publisherWashburn University. School of Businessen_US
dc.subjectAccounting - Law and legislation - United Statesen_US
dc.subjectEarning managementen_US
dc.subjectBusiness forecastingen_US
dc.subjectSarbanes-Oxley Act of 2002en_US
dc.subjectRegulation Fair Disclosureen_US
dc.subjectGlobal Analyst Research Settlmenten_US
dc.subjectForecast accuracyen_US
dc.subjectAnalyst forecasten_US
dc.subjectForecast dispersionen_US
dc.titleHave Analyst Forecast Properties Improved After Regulations?en_US
dc.typeWorking paperen_US
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