Readability of Annual Reports Affects Accuracy of Analyst Forecasts
ANN ARBOR, Mich.—Stock analysts’ earnings forecasts for companies with hard-to-read annual financial reports are more informative, but less accurate, say University of Michigan researchers.
A new journal article in the May issue of Accounting Review shows that sell-side financial analysts expend greater effort to generate earnings forecasts of publicly traded firms with less readable 10-K filings. This increased effort by analysts results in earnings reports to investors that contain more information—but less accuracy and greater uncertainty. (more…)