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Analysts’ Use of Nonfinancial Information Disclosures

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  • ANA SIMPSON

Abstract

In this study I examine how analysts process nonfinancial information and how this is affected by the patterns of firms’ nonfinancial information disclosures. More specifically, I examine the association between analyst earnings forecast errors and the persistence of nonfinancial disclosures, both across information content and over time. The study focuses on firms in the wireless industry for the period 1997–2007. The results show that analysts tend to underreact to the information contained in customer acquisition cost, average revenue per user, and the number of subscribers. These are the performance measures that have significant predictive ability for future earnings of wireless firms. Distinguishing between firms on the basis of their nonfinancial disclosure patterns reveals that the above findings are driven primarily by firms with irregular disclosures. There is no evidence of analysts’ inefficiency in evaluating the content of nonfinancial metrics provided by persistently disclosing firms. This implies that the lack of systematic disclosures of performance measures restricts financial analysts’ ability to fully analyze the contributions of these metrics for future earnings.

Suggested Citation

  • Ana Simpson, 2010. "Analysts’ Use of Nonfinancial Information Disclosures," Contemporary Accounting Research, John Wiley & Sons, vol. 27(1), pages 7-7, March.
    • Handle: RePEc:wly:coacre:v:27:y:2010:i:1:p:7-7
    DOI: 10.1111/j.1911-3846.2010.01010_7.x
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    Cited by:

    1. Omaima A.G. Hassan, 2018. "The impact of voluntary environmental disclosure on firm value: Does organizational visibility play a mediation role?," Business Strategy and the Environment, Wiley Blackwell, vol. 27(8), pages 1569-1582, December.
    2. Annika Wahl & Michel Charifzadeh & Fabian Diefenbach, 2020. "Voluntary Adopters of Integrated Reporting – Evidence on Forecast Accuracy and Firm Value," Business Strategy and the Environment, Wiley Blackwell, vol. 29(6), pages 2542-2556, September.
    3. Sengiwakhile Mngomezulu, 2020. "Political Interference in the Administration of Service Delivery in UMLALAZI Local Municipality of KwaZulu-Natal, South Africa," Journal of Economics and Behavioral Studies, AMH International, vol. 12(1), pages 38-45.
    4. Isabel María García‐Sánchez & María‐Elena Gómez‐Miranda & Fátima David & Lazaro Rodríguez‐Ariza, 2019. "Analyst coverage and forecast accuracy when CSR reports improve stakeholder engagement: The Global Reporting Initiative‐International Finance Corporation disclosure strategy," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 26(6), pages 1392-1406, November.
    5. Lei Dong & Bernard Wong‐On‐Wing, 2021. "Does causally linking nonfinancial measures influence investors' use of management’s disclosures of nonfinancial information?," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(S1), pages 2269-2299, April.
    6. Bok Baik & Joon Chae & Sunhwa Choi & David B. Farber, 2013. "Changes in Operational Efficiency and Firm Performance: A Frontier Analysis Approach," Contemporary Accounting Research, John Wiley & Sons, vol. 30(3), pages 996-1026, September.
    7. He, Guanming & Li, April Zhichao, 2024. "Does media coverage of firms' environment, social, and governance (ESG) incidents affect analyst coverage and forecasts? A risk perspective," International Review of Financial Analysis, Elsevier, vol. 94(C).
    8. Genevé Richard & Elza Odendaal, 2020. "Integrated reporting assurance practices—a study of South African firms," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 17(4), pages 245-266, December.
    9. Genevé Richard & Elza Odendaal, 2021. "Credibility-enhancing mechanisms, other than external assurance, in integrated reporting," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 25(1), pages 61-93, March.

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