Do Corporate Disclosures Constrain Strategic Analyst Behavior?

Abstract

We show that analyst behavior changes in response to a randomly assigned shock that exogenously varies the timeliness and cost of accessing mandatory disclosures in the cross-section of investors: Analysts reduce coverage and issue less optimistic, more accurate, less bold, and less informative forecasts. Our evidence indicates that analysts reduce a strategic component of their behavior: The changes are stronger among analysts with more strategic incentives like affiliated or retail-focused analysts. We conclude that mandatory disclosure can substitute for analyst information production, which is constrained by investors' ability to verify forecasts using corporate filings. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.