Using earnings conference calls to identify analysts with superior private information
We examine the extent to which analysts who participate in earnings conference calls by asking questions possess superior private information relative to analysts who do not ask questions. Using a large sample of earnings conference call transcripts over the period 2002–2005, we find that annual earnings forecasts issued immediately after a conference call are both more accurate and timelier for participating analysts relative to nonparticipating analysts. These results hold after controlling for observable analyst characteristics, suggesting conference call participation can serve as a mechanism to identify analysts possessing superior private information. The economic magnitude of the superior private information contained in participating analyst forecasts is small but comparable with magnitudes reported in prior studies with respect to other analyst characteristics. Our mediation analysis does not support the notion that the superior private information stems exclusively from the information received during the call. Therefore, from a regulatory stand point, our results suggest that regulatory intervention to allow for equal participation during conference calls may be unwarranted.
KeywordsConference calls Private information benefits Financial analysts Regulation FD Forecast accuracy Forecast timeliness
JEL ClassificationM41 G24 G29 G38 K22
We appreciate helpful comments and suggestions from three anonymous referees, Larry Brown, Michael Clement, Yonca Ertimur, Jennifer Francis, Richard Frankel, Doron Nissim (the editor), Beverley Walther, Hal White, Richard Willis, Yong Yu, the managing director and director of research at a prominent sell-side research firm, members of the National Investor Relations Institute (NIRI) Triangle chapter and seminar participants at the Duke Accounting mini-brown bag, Fuqua summer brown bag, Texas A&M summer brown bag, Southeast Summer Accounting Research Conference at the University of Georgia, Washington University at St. Louis, and the AAA Financial Accounting and Reporting Section 2010 Midyear meeting.
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