October 2, 2022

Study: Analysts Just as Illiterate as Investors When Reading Financial Reports

Convoluted corporate financial reports are just as unreadable for professional stock analysts as they are for the average investor, according to a new study.

The study, published in the current issue of the American Accounting Association journal Accounting Review, tested the readability of tens of thousands of company filings over 12 years and found that analysts’ earnings forecasts for firms with less readable reports “have greater dispersion, are less accurate, and are associated with greater overall analyst uncertainty.” Ironically, however, the syntactic and linguistic complexity of these reports generated greater demand from investors for analysts’ commentary and greater reliance on their forecasts. [AT]

Convoluted corporate financial reports are just as unreadable for professional stock analysts as they are for the average investor, according to a new study.

The study, published in the current issue of the American Accounting Association journal Accounting Review, tested the readability of tens of thousands of company filings over 12 years and found that analysts’ earnings forecasts for firms with less readable reports “have greater dispersion, are less accurate, and are associated with greater overall analyst uncertainty.” Ironically, however, the syntactic and linguistic complexity of these reports generated greater demand from investors for analysts’ commentary and greater reliance on their forecasts. [AT]

Latest Accounting Jobs--Apply Now:

Have something to add to this story? Give us a shout by email, Twitter, or text/call the tipline at 202-505-8885. As always, all tips are anonymous.

Related articles

Sarcastically Surprised Kirk meme

The Talent Shortage Has Gotten So Bad Clients Are Now Doing Their Own Audit Documentation

The Securities and Exchange Commission has charged Deloitte China with failing to comply with fundamental U.S. auditing requirements because in numerous audits over numerous years Deloitte China asked clients to select their own samples for testing and to prepare their own audit documentation. From the SEC press release: The Securities and Exchange Commission today charged […]