The Impact of Investor Relations Disclosure on Analysts’ Forecasts

Abstract

Investor relations represents a firm’s commitment to communicate effectively with the external community which includes investors and analysts and both mandatory and voluntary information release is expected to reduce information asymmetry. We investigate the effects of disclosure quality on corporate websites on several properties of analyst forecasts, including accuracy, dispersion and revision volatility. We find more extensive disclosure through investor relations in S&P/ASX 300 firms over the time period investigated and increased disclosure quality leading to more accurate forecasts and less revision volatility, These findings emphasise the importance for firms to communicate effectively with analysts, whose earnings forecasts form the basis of the market’s expectation of firm performance.