Analyst rounding of EPS forecasts and stock recommendations

Akono, Henri and Karim, Khondkar and Nwaeze, Emeka,(2019), Analyst rounding of EPS forecasts and stock recommendations. , Advances in Accounting, UNSPECIFIED

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We examine the association between analysts' stock recommendations and their tendency to round annual EPS forecasts to nickel intervals (i.e. placing a zero or five in the penny location of the forecast). We find that prior to Regulation Fair Disclosure (Reg FD), analysts were more likely to provide rounded EPS forecasts in association with unfavorable (underperform and sell) recommendations. However, after Reg FD, we find no significant association between rounded forecasts and unfavorable stock recommendations. Further, other regulations (NASD 2711, NYSE 472, and Global Research Analyst Settlement) have no impact on analyst rounding behavior. The findings in this study suggest that analyst rounding behavior is a particular form of forecasting optimism motivated, at least in part, by management relations incentives. Further, Reg FD appears partially successful at curbing the influence of management relations incentives on analysts' research.
Keywords : Rounding of EPS forecasts Stock recommendations Management relations incentives Regulation Fair Disclosure Analyst experience, UNSPECIFIED
Journal or Publication Title: Advances in Accounting
Volume: 44
Item Type: Article
Subjects: Akuntansi
Depositing User: Users 8 not found.
Date Deposited: 23 Dec 2019 06:54
Last Modified: 23 Dec 2019 06:54

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