Catering behaviors in corporate digitization disclosures: Identification and analyst forecast accuracy loss

This paper identifies the catering behaviors in corporate digitization disclosures (CDD) and examines their effects on analyst forecast accuracy. By creating a peer-relative catering behavior score, we measure the extent to which firms cater to investors and provide evidence that catering behaviors in CDD decrease the improvement effect of CDD on analyst forecast accuracy. We further find that catering behaviors reduce the improvement effect of CDD by decreasing information quality and information comparability. Finally, we document that the reduction effect of catering behaviors is more pronounced in firms with poor information environment and firms followed by fewer expert analysts. Overall, our findings are consistent with the argument that narrative disclosures can be used both to reduce information asymmetry and to cater to investor demand.