IDEAS home Printed from
MyIDEAS: Login to save this article or follow this journal

Alternative evidence on financial analysts' use of financial statement information

  • Donal Byard
  • Fatma Cebenoyan

Purpose – Financial analysts are frequently viewed as information intermediaries who process and interpret firms' financial reports for other market participants. Much recent research, however, has cast doubts on analysts' ability to fully utilize the information in firms' financial reports. Using an alternative approach, this study aims to provide evidence on how sophisticated analysts are at using information in firms' financial reports. Design/methodology/approach – The paper estimates different measures of firms' operational efficiency, all of which are derived from financial statement data, and compares the strength of the association between these measures and analysts' absolute forecast errors. It then compares a sophisticated frontier-based measure of firms' operational efficiency that evaluates firms' performance relative to their competitors with three more traditional efficiency measures; specifically the return on asset (ROA) ratio, industry-adjusted ROA, and the return on equity ratio. Findings – The results indicate that the more sophisticated frontier-based measure is more strongly negatively associated with analysts' absolute forecast errors than the other three measures. The results thus suggest that analysts are capable of undertaking a sophisticated analysis of the information in firms' financial reports, at least as it pertains to operational efficiency. Originality/value – To the extent that analysts serve as a key group of users of financial information, these results are likely to be of interest to accounting policy makers.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:;jsessionid=4C3FD8A6420A21E0C806C84F5F942680?contentType=Article&contentId=1640709
Download Restriction: Cannot be freely downloaded

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Emerald Group Publishing in its journal Review of Accounting and Finance.

Volume (Year): 6 (2007)
Issue (Month): 4 (November)
Pages: 442-459

in new window

Handle: RePEc:eme:rafpps:v:6:y:2007:i:4:p:442-459
Contact details of provider: Web page:

Order Information: Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
Web: Email:

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eme:rafpps:v:6:y:2007:i:4:p:442-459. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Louise Lister)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.