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Does information uncertainty affect investors' responses to analysts' forecast revisions? An investigation of accounting restatements

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  • Barniv, Ran R.
  • Cao, Jian

Abstract

Prior studies provide only limited evidence on how and why investors rely on analyst forecasts. We investigate one aspect of this research paradigm by examining investor response to analyst forecast revisions using accounting restatements as a proxy for uncertainty. We find that investors tend to rely more on the information that analyst characteristics convey about forecast accuracy in restatement firms than in non-restatement firms. The evidence also suggests that the level of restatement intensity and the length of reaction window affect investors' reliance on these characteristics. Further analysis demonstrates that the innovation in forecast revisions also affects the association between investor response and analyst characteristics. Our findings are consistent with increased information uncertainty stimulating investor demand for analyst research.

Suggested Citation

  • Barniv, Ran R. & Cao, Jian, 2009. "Does information uncertainty affect investors' responses to analysts' forecast revisions? An investigation of accounting restatements," Journal of Accounting and Public Policy, Elsevier, vol. 28(4), pages 328-348, July.
    • Handle: RePEc:eee:jappol:v:28:y:2009:i:4:p:328-348
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    Cited by:

    1. Barber, Russell & Hollie, Dana & Massel, Norman, 2024. "The concerns of linking IRS tax disclosures to financial statements on analysts' effective tax rate forecasts," Advances in accounting, Elsevier, vol. 66(C).
    2. Wang, Jiangyuan & Gan, Jiawu & Li, Zhen, 2021. "Industrial policy, uncertainty, and analysts’ earnings forecast: Evidence from China," Economic Analysis and Policy, Elsevier, vol. 70(C), pages 249-258.
    3. Le, Cao Hoang Anh & Shan, Yaowen & Taylor, Stephen, 2024. "International economic policy uncertainty and analysts' earnings forecasts," Pacific-Basin Finance Journal, Elsevier, vol. 85(C).
    4. Min Chen & Zhaobo Zhu & Peiwen Han & Bo Chen & Jia Liu, 2022. "Economic policy uncertainty and analyst behaviours: Evidence from the United Kingdom," Post-Print hal-03628930, HAL.
    5. Li, Wanyun, 2022. "Disclosure of internal control material weaknesses and optimism in analyst earnings forecasts," International Journal of Accounting Information Systems, Elsevier, vol. 44(C).
    6. Laure de Batz & Evžen Kočenda, 2024. "Financial crime and punishment: A meta‐analysis," Journal of Economic Surveys, Wiley Blackwell, vol. 38(4), pages 1338-1398, September.
    7. Chen, Min & Zhu, Zhaobo & Han, Peiwen & Chen, Bo & Liu, Jia, 2022. "Economic policy uncertainty and analyst behaviours: Evidence from the United Kingdom," International Review of Financial Analysis, Elsevier, vol. 79(C).
    8. Chakrabarty, Bidisha & Seetharaman, Ananth & Wang, Weimin, 2014. "Institutional versus retail trades following financial restatements: The effect of Sarbanes-Oxley," Research in Accounting Regulation, Elsevier, vol. 26(1), pages 12-25.
    9. Sun, Qian & Cheng, Xiaoke & Gao, Shenghao & Yang, Mingjing, 2020. "Are SEO investors misled by analyst optimism bias? Evidence from investor bids in SEO auctions," International Review of Economics & Finance, Elsevier, vol. 68(C), pages 90-104.

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