Corporate Disclosure Quality and Properties of Analysts' Information Environment

This study examines how the quality of corporate disclosures impacts the precision of information that financial analysts incorporate into their forecasts of upcoming annual earnings. Our empirical measures distinguish between the precision of individual analysts' common and idiosyncratic (private) information, and between the quality of firms' public disclosures and private communications with analysts. We find that higher quality disclosures increase the precision of individual analysts' common and idiosyncratic information. These findings are due to higher quality annual and quarterly accounting disclosures. In contrast, we find no evidence that the quality of private communications between analysts and management affects the precision of analysts' common or idiosyncratic information