Does corporate disclosure policy change financial analysts' behaviour? Evidence from France

Abstract

PurposeThe purpose of this paper is to examine whether financial analysts are sensitive to voluntary earning disclosures.Design/methodology/approachThe paper is based on a literature review of the relationship between analysts' behaviour and corporate disclosures. It is assumed first that analyst coverage both influences and is influenced by voluntary earning disclosures, and that second, French managers are expected to make voluntary disclosures in order to reduce market uncertainty. To test these hypotheses, a simultaneous equation model and an ordinary least square regression framework were estimated on a sample of 154 French‐listed firms between 1998 and 2001.FindingsThe results show that voluntary earning disclosures positively influence analyst coverage decision. They also show that voluntary disclosures improve the accuracy of analyst forecasts and reduce market uncertainty.Research limitations/implicationsThe paper does not cover all forms of corporate voluntary disclosures.Practical implicationsThe findings suggest that corporate disclosure policy is likely to change financial analysts' behaviour. The results are useful to both managers, wishing to meet market expectations and, to investors wishing to invest in richer informational environment firms.Originality/valueThis paper provides original results about the role of analysts in France as information intermediaries. These analysts pay little attention to French firms with a poor information environment in which minority shareholders are less inclined to ask for costly analyst coverage.