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Analyzing Financial Analysts


Affiliations
1 School of Business and Management University of San Francisco San Francisco, CA 94117
     

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The impact that financial analysts have on the share prices of publicly held companies has come under increasing scrutiny. However, despite the role they play in the financial markets, surprisingly little is known about the way in which analysts evaluate companies', report financial information or how they assess the quality of companies' earnings. We surveyed 34 financial analysts across 18 industries to address two issues in tandem - their use of financial information and their determination of earnings' quality. We found that analysts rely primarily on adjusted earnings figures, line of business data, reported cash flows, and the use of accounting conservatism in evaluating companies. Further, analysts regarded earnings growth, corporate growth prospects, risk, and recurring earnings as the primary determinants of quality for a company's earnings. Given these findings, it seems prudent for managers to focus corporate strategy on improving the results that are most closely inspected - i.e. earnings growth, growth prospects, reduction of financial and operating risk, and the persistence of earnings.

Keywords

Financial Analysts, Financial Reports, Earnings’ Quality
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Abstract Views: 478

PDF Views: 1




  • Analyzing Financial Analysts

Abstract Views: 478  |  PDF Views: 1

Authors

Carroll M.. Grraham,
School of Business and Management University of San Francisco San Francisco, CA 94117
Marrk V.. Canniice
School of Business and Management University of San Francisco San Francisco, CA 94117
Todd L.. Sayyrre
School of Business and Management University of San Francisco San Francisco, CA 94117

Abstract


The impact that financial analysts have on the share prices of publicly held companies has come under increasing scrutiny. However, despite the role they play in the financial markets, surprisingly little is known about the way in which analysts evaluate companies', report financial information or how they assess the quality of companies' earnings. We surveyed 34 financial analysts across 18 industries to address two issues in tandem - their use of financial information and their determination of earnings' quality. We found that analysts rely primarily on adjusted earnings figures, line of business data, reported cash flows, and the use of accounting conservatism in evaluating companies. Further, analysts regarded earnings growth, corporate growth prospects, risk, and recurring earnings as the primary determinants of quality for a company's earnings. Given these findings, it seems prudent for managers to focus corporate strategy on improving the results that are most closely inspected - i.e. earnings growth, growth prospects, reduction of financial and operating risk, and the persistence of earnings.

Keywords


Financial Analysts, Financial Reports, Earnings’ Quality

References