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 language | English |
|---|---|
| Pages | 1 |
| Number of pages | 45 |
| Publication status | Published - 2015 |
| Event | European Accounting Association Annual Congress 2015 - Glasgow, Glasgow, United Kingdom Duration: 11 Feb 2015 → 11 Feb 2015 |
Conference
| Conference | European Accounting Association Annual Congress 2015 |
|---|---|
| Country/Territory | United Kingdom |
| City | Glasgow |
| Period | 11/02/15 → 11/02/15 |
Keywords
- Corporate refocusing activities
- earnings forecast revisions
- target price revisions
- forecast errors