abstract
We examine the relationship between analyst research and corporate earnings
announcements to explore the relative importance of information discovery versus
interpretation of previously released information. Using equity market reaction to
capture information content, we find that information discovery (interpretation)
dominates in the week before (after) firms announce their earnings. In addition, we
find that the interpretation role increases in importance with the difficulty of financial
accounting information. Analysis of all weeks surrounding earnings announcements
shows that the information discovery role is overall more important. We are able to
reconcile this result with the opposite finding in Francis et al. (2002).
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