How do financial analysts interpret industrial firms' corporate refocusing announcement?

    Research output: Contribution to conference (unpublished)Paperpeer-review

    Abstract

    This paper investigates how financial analysts interpret UK-listed industrial firms' corporate refocusing announcement in three ways: firstly, it examines the association between analysts' earnings (and target price) forecasts, errors and refocusing announcement. Secondly, it investigates the association between analysts' earnings (and target price) forecast revisions and good and bad news of refocusing announcements. Thirdly, it studies the relationship between analysts' earnings (and target price) forecasts revisions, firms' excess stock returns, and analysts' coverage under the effect of good and bad news. The results show that analysts revise current year and one-year-ahead earnings forecasts significantly downward in the refocusing announcement year but adjust target price forecasts significantly downward in the year before the refocusing announcement year. Their current year and one-year-ahead accuracy declines in the same year; despite the downward revision, analysts are optimistically biased. Their current and one-year-ahead earnings forecast revisions are more strongly associated with bad news than with good news in the refocusing announcement year. The significant association between target price revisions and bad news is found in the year before the refocusing announcement year.
    Original languageEnglish
    Pages1
    Number of pages45
    Publication statusPublished - 2015
    EventEuropean Accounting Association Annual Congress 2015 - Glasgow, Glasgow, United Kingdom
    Duration: 11 Feb 201511 Feb 2015

    Conference

    ConferenceEuropean Accounting Association Annual Congress 2015
    Country/TerritoryUnited Kingdom
    CityGlasgow
    Period11/02/1511/02/15

    Keywords

    • Corporate refocusing activities
    • earnings forecast revisions
    • target price revisions
    • forecast errors

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