The Impact of Analyst Conference Calls on the Information Playing Field

Thursday, Nov 18 2010 by
The Impact of Analyst Conference Calls on the Information Playing Field

Following the introduction of Regulation Fair Disclosure by the SEC in 2000, most of the recent empirical research on the impact of disclosure and dissemination on information asymmetry for investors and companies has come out of the United States. [1] As a result, we were intrigued to hear of a paper recently published by a team of German researchers from Goethe University Frankfurt entitled  “Do Analyst Conferences Provide Informational Benefits? Evidence from Analyst Forecast Properties in a Non-US Forecasting Environment”.

The study is apparently the first to analyse the informational role of analyst conferences in a non-US type forecasting environment. The work examined the impact of conferences / calls with listed German firms on upcoming annual earning forecasts by analysts, specifically looking at the impacton forecast error and forecast dispersion. In Germany, unlike the US following the implementation of Reg FD, most analyst conferences are conducted as “closed calls”, i.e. access is restricted to invited participants only. Interestingly, the research found that these conferences and calls improve analysts' ability to forecast future earnings accurately, suggesting that material information is being released during analyst conferences. 

We spoke earlier with the team, Julian Pachta, Zoltan Novotny-Farkas and Moritz Bassemir, to find out more about their recent work and its possible implications.

Thanks for speaking to Stockopedia. Could you please talk a bit about the background/profile of the research team?

Moritz Bassemir: We are all from Goethe University Frankfurt. Zoltan and I are fourth-year accounting Phd students at the chair of Prof. Günther Gebhardt. Zoltan is also a member of the INTACCT research network. INTACCT is dedicated to accounting and capital markets research at the top international level and is a major collaboration between some of the leading universities in Europe like Lancaster University, HEC Paris and Goethe University Frankfurt. Julian graduated from Goethe University and is currently working for an international investment-banking firm in Frankfurt. Our research interests are mainly concerned with the interaction of firm disclosure and capital markets.

What inspired this research project? Why has European research in this area lagged behind the US? 

Julian Pachta: Analyst conferences and calls are an interesting disclosure event. They differ from other forms of disclosure due to their unscripted, interactive nature which allows analysts to pose open questions to management and to potentially elicit information that is not disclosed otherwise. Over the last…

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3 Comments on this Article show/hide all

marben100 18th Nov '10 1 of 3

Nice research.

I think focusing on the actual content of analyst conferences could be an exciting field of research

Anecdotally, I can tell you now, that on UK conference calls that I have been able to sit in on, I have heard analysts asking for & getting guidance on such matters as management current year gross margin and EPS expectations. Most investors would find such information helpful!

As a matter of policy, it is plain to me that any investor should be able to sit in on calls & presentations where such information is disclosed. This was the case with the calls I am referring to - but doubtless also applies to the many calls & presentations that only analysts are able to particip\te in.

Regarding policy, commercial confidentiality is an issue that businesses may be concerned about . However, if information is genuinely commercially confidential, then ISTM that it should simply not be disclosed, whether to analysts or to investors.




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tournesol 19th Nov '10 2 of 3

As far as I can see from my first, very rushed, speed read of this interesting article, the hypothesis being tested in this research can be summed up as:
"conference calls help analysts to make more accurate forecasts of company financials."

It seems intuitively obvious that such a hypothesis must be correct.

However, to my mind that hypothesis (and therefore the study) rather misses a more interesting point. In my opinion the more interesting and more important hypothesis would be something along the lines of:
"conference calls help analysts and investors: to understand business strategy and plans; to assess management and operational effectivesness/efficiency; to appreciate opportunities and risks; to get a real time update on events. This creates the conditions for investment out-performance by influencing the timing and size of transactions."

The way to test that hypothesis would be:
- to compare and contrast the investment returns obtained by conference call attendees with respect to the stocks of the conference calling companies vs other stocks where the underlying co did not provide conference calls.
- to compare and contrast the investment returns obtained by conference call attendees with respect to the stocks of the conference calling companies vs other analysts/investors who did not attend the call.

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About Dave Brickell

Dave Brickell

Dave is one of the co-founders of Stockopedia.  Over the last twenty years, hedge funds and the financial institutions at the heart of the City have become increasingly dominated by quantitative analysis, high quality data and computing power. They have learned to invest in ever more optimal ways designed to prey on the weaker hands in the market. Unfortunately, the resources available to individual investors have just not kept pace. We believe strongly in the power of quantitative models & analysis to improve investor decision-making and don't see why their benefits should only be enjoyed by those wealthy enough to invest in hedge funds.  more »

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