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The revision frequency of earnings forecasts and firm characteristics

Listed author(s):
  • Chan, Chia Ying
  • Lo, Huai-Chun
  • Yang, Ming Jing
Registered author(s):

    This study investigates how the revision frequency of earnings forecasts affects firm characteristics. Previous studies generally focus on the number of analysts following a firm to measure a firm's information environment. The frequency with which news is updated is often defined as an analyst's effort. Analysts provide more information to investors if they update news more frequently. This study examines whether the frequency of information updating for a particular firm affects the firm's performance. We apply three proxies for firm performance: stock liquidity, the cost of equity capital, and firm value. Our findings indicate that the analysts’ effort as measured by the frequency of news updating is effective in providing additional power beyond the number of analysts to represent the information environment of a firm. Therefore, this study suggests that combining both the number of analysts following a firm and the frequency of news updating can be a better proxy for assessing a firm's information environment.

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    File URL: http://www.sciencedirect.com/science/article/pii/S1062940815001205
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    Article provided by Elsevier in its journal The North American Journal of Economics and Finance.

    Volume (Year): 35 (2016)
    Issue (Month): C ()
    Pages: 116-132

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    Handle: RePEc:eee:ecofin:v:35:y:2016:i:c:p:116-132
    DOI: 10.1016/j.najef.2015.11.002
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620163

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