Do analysts’\u27 forecast properties deter suboptimal labor investment decisions? Evidence from Regulation Fair Disclosure

We examine whether analyst forecast properties deter inefficient labor investment decisions. Using accuracy and dispersion as analyst forecast properties, we find that more accurate and less dispersed forecasts are associated with less inefficient corporate labor investments. We Utilizing Regulation Fair Disclosure (Reg FD) as an exogenous variation to analyst forecasts\u27 activities we find a causal relationship between analyst forecast properties and labor investment inefficiency. We also find that more accurate and less dispersed forecasts decrease labor cost stickiness. Our results are consistent with the view that analyst forecast properties enhance the information environment, which, in turn, improves corporate labor investment decisions

Foreign exchange exposure and analysts’ earnings forecasts

International audienceThis study examines how movements in a firm's exposure to foreign exchange (forex) rates affect the properties of analysts' earnings forecasts. Our results suggest that analysts' forecast errors and dispersion increase with an increase in forex exposure within firms. These findings are robust to a wide range of robustness tests, including a quasi-experimental setting based on the sudden unpegging of the U.S. Dollar against the Chinese Yuan. Additional tests reveal that analysts spend more effort forecasting when firms experience an increase in forex exposure. Consistent with an increase in uncertainty of firm outcomes representing the primary channel through which forex exposure affects analysts' forecasts, we find that the effect of forex exposure is heightened in the presence of greater volatility in the U.S. Dollar. However, we also find that more readable annual reports and higher media coverage can help improve the quality of analysts' forecast properties for firms with increasing forex exposure. We also present evidence of some benefits analysts can realize from coverage of high forex exposure firms through generating greater stock trading and securing positions in more prestigious brokerage firms