Analyzing Financial Analysts: What They Look for in Financial Reports and How They Determine Earnings' Quality

The impact that financial analysts have on the share prices of publicly held companies has come under increasing scrutiny. However, despite the role they play in the financial markets, surprisingly little is known about the way in which analysts evaluate companies', report financial information...

Full description

Saved in:
Bibliographic Details
Published inJournal of management research Vol. 2; no. 2; p. 63
Main Authors Graham, Carol M, Cannice, Mark V, Sayre, Todd L
Format Journal Article
LanguageEnglish
Published New Delhi South Asia Publications 01.08.2002
Subjects
Accounting
Corporate growth
Earnings
Financial analysis
Financial reporting
Financial statement analysis
Investment advisors
Polls & surveys
Prices
Questionnaires
Response rates
Securities markets
Studies
United States > US
Online AccessGet full text

Cover

More Information
Summary:The impact that financial analysts have on the share prices of publicly held companies has come under increasing scrutiny. However, despite the role they play in the financial markets, surprisingly little is known about the way in which analysts evaluate companies', report financial information or how they assess the quality of companies' earnings. We surveyed 34 financial analysts across 18 industries to address two issues in tandem - their use of financial information and their determination of earnings' quality. We found that analysts rely primarily on adjusted earnings figures, line of business data, reported cash flows, and the use of accounting conservatism in evaluating companies. Further, analysts regarded earnings growth, corporate growth prospects, risk, and recurring earnings as the primary determinants of quality for a company's earnings. Given these findings, it seems prudent for managers to focus corporate strategy on improving the results that are most closely inspected - i.e. earnings growth, growth prospects, reduction of financial and operating risk, and the persistence of earnings. [PUBLICATION ABSTRACT]
ISSN:0972-5814
0974-0287